Pound V euro: GBP exchange rate steady as UK economic growth stronger than expected
THE pound is holding steady against the euro this morning as investors react to the UK’s latest GDP figures.
The pound euro exchange rate is currently at around €1.143, holding close to this morning’s opening levels after stumbling over half a cent on Thursday.
According to data published by the Office for National Statistic (ONS), the UK economy grew by 0.5 per cent in the fourth quarter.
This beat expectations that growth would have held at 0.4 per cent and suggests that the UK economy is expanding at a robust pace despite some disruptions caused by Brexit uncertainty.
The better-than-expected reading was mostly on the back of strong service sector activity in the last three months of the year.
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With service activity accounting for over 80 per cent of the UK economy, the sector’s expansion from 0.4 per cent to 0.6 per cent provided the bulk of the growth and helped to offset a dip in the construction sector.
Darren Morgan, head of GDP at the ONS, said: “The boost to the economy at the end of the year came from a range of services including recruitment agencies, letting agents and office management.”
However, in 2017 as a whole growth was a little more modest at 1.8 per cent, down from 1.9 per cent in 2016 and the slowest pace of growth since 2012.
The ONS warned that the broader picture was one of "slower and more uneven" growth.
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The boost to the economy at the end of the year came from a range of services including recruitment agencies, letting agents and office management
Meanwhile the euro remains on a strong footing this morning following the European Central Bank’s (ECB) policy meeting yesterday.
While the bank chose to leave rates unchanged, markets reacted positively to the ECB’s apparent renewed confidence in inflation, with ECB President, Mario Draghi hailing the Eurozone’s recent growth.
This optimism was also reflected in long-term projections from the ECB’s Survey of Professional Forecasters this morning, which projects headline inflation could strike 1.5 per cent this year, before reaching 1.7 per cent in 2019.
Looking ahead to next week the GBP/EUR exchange rate may build on its recent strength if the UK’s latest Manufacturing PMI reports that factory activity rose in January as forecast.
However before that, the Eurozone will publish its own GDP figures on Tuesday.
The euro is likely to jump if the solid economic performance shown by the bloc in the second half of 2017 prompts growth to tick higher in the fourth-quarter.
