Fundamental analytics

British Pound Strengthens Following Stronger than Expected Economic Growth

The British pound climbed against the U.S. dollar on Friday to recover some of the losses it had yesterday and trade near the highest level in about one and half year. The British currency also posted some gains against the euro, helped by solid economic growth in the last quarter of 2017.

 

The pound climbed by 0.9 percent, or 1.3 cents, to 1.4278 U.S. dollars per pound, before giving up some of the gains to trade at 1.4240 dollars. The British currency had reached 1.4327 yesterday, its highest level since June 2016. Against the shared currency, the pound rose to 0.8729 pound per euro, which was the strongest level it had since early trading hours yesterday.

 

The U.K. Office for National Statistics published a report on economic growth earlier today, which provided the pound with most of its strength. The report stated that the U.K. gross domestic product increased by 1.5 percent in the fourth quarter of 2017 on a yearly basis, which exceeded expectations of a 1.4 percent gain. Gross domestic product grew by 1.7 percent in the third quarter of the year from a year earlier.

 

The report added that gross domestic product had a quarterly increase of 0.5 percent, which compares to a 0.4 percent increase in between July to September of the same year.  The services sector, which contributes the most to economic growth in the United Kingdom, increased by 0.6 percent due to stronger activity in business services and finance.

 

On the other hand, the construction sector decreased for the third consecutive quarter, which reduced the growth over 2017 to 5.1 percent. A strong performance in the beginning of the year was behind most of the increase.

 

In the last year, gross domestic product grew by 1.8 percent, according to initial estimates. This comes slightly lower than the growth rate the British economy had in the year before at 1.9 percent.

 

The pound has gained a lot of ground against the dollar in recent weeks. Investors became more confident that Prime Minister Theresa May could secure a favorable deal for the United Kingdom with the European Union, which supported the British currency. Meanwhile, political uncertainty in the United States had a negative effect on the dollar, which is trading near its lowest level against the euro in more than three years.

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