- The sterling pound falls on all fronts while the GDP figures and the industrial production of the United Kingdom disappoint.
- The United Kingdom’s exports to the US registered their greatest monthly drop in history, despite the commercial agreement between the United Kingdom and the USA.
- The weak data of the United Kingdom have increased the expectations of greater relief by the BOE.
Libra accelerates its reversal against the Japanese yen and is approaching the bottom of the Negotiation rank last week, in 194.70, beaten by the disappointing monthly GDP figures and the manufacturing production of the United Kingdom.
The highest taxes and the turbulence of Trump’s tariffs affected the United Kingdom economy in April, and GDP contracted at a rate of 0.3%, its worst monthly performance since October 2023. These figures exceed the contraction of 0.1% forecast by experts and revert increases of 0.2% and 0.5% in March and February.
Weak data increase the hopes of BOE cuts
Apart from that, manufacturing production contracted 0.9%, beyond the expected 0.8%, and industrial production fell 0.6%, also exceeding market forecasts of a 0.5%decrease. The April commercial deficit was extended to 23.20 billion GBP from less than 20 billion GBP in March
The commercial agreement between the US and the United Kingdom has failed to avoid a monthly record record in exports to the United States. The United Kingdom companies have been forced to fire employees and postpone investment decisions, affected by the highest tariffs in the US.
These figures point to a weak growth of GDP in the second quarter, which, together with the highest unemployment figures seen on Tuesday, have increased hopes of greater relief by the BOE. Future markets are valuing around two more rates cuts before the end of the year.
GDP FAQS
The gross domestic product (GDP) of a country measures the growth rate of its economy for a certain period of time, normally a quarter. The most reliable figures are those that compare GDP with the previous quarter (for example, the second quarter of 2023 with the first of 2023) or with the same period of the previous year (for example, the second quarter of 2023 with the second of 2022).
The annualized quarterly figures of GDP extrapolate the growth rate of the quarter as if it were constant for the rest of the year. However, they can be misleading if temporary disturbances affect growth in a quarter but it is unlikely that they last all year, as happened in the first quarter of 2020 with the burst of the coronavirus pandemic, when the growth collapsed.
A higher GDP result is usually positive for the currency of a nation, since it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting greater foreign investment. Similarly, when GDP falls it is usually negative for the currency.
When an economy grows, people tend to spend more, which causes inflation. The Central Bank of the country then has to raise interest rates to combat inflation, with the side effect of attracting more world investor capital tickets, which helps the appreciation of the local currency.
When an economy grows and GDP increases, people tend to spend more, which causes inflation. Then, the country’s central bank has to raise interest rates to combat inflation. Higher interest rates are negative for gold because they increase the opportunity cost to keep gold in the face of placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for the price of gold.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
