ONS Reveals UK Economy Did Not Double Dip But GBP EUR Exchange Rate Falls Anyway

Published: Friday, 28 June 2013 09:00 BST - Written by Tim Boyer

STORY LINK ONS Reveals UK Economy Did Not Double Dip But GBP EUR Exchange Rate Falls Anyway

‘What should go up and doesn’t go up can only come down’, or so the tried and tested market adage goes. This certainly held true for Sterling during yesterday’s session, as a brace of ostensibly positive risk events failed to stop the UK tender from incurring losses against the majority of the other sixteen most actively traded global currencies.

The first of these came from Britain’s government statistics bureau, the Office of National Statistics (ONS), which announced that the UK economy did not in fact enter a double dip recession last year – the British economic slowdown had amounted to a mere one-off contraction followed by a recovery. The ONS announced that it had upwardly revised its Q1 2012 GDP figure from a previous estimate of -0.1% up to ‘no change’, meaning that the British economy had not in fact contracted for two consecutive quarters, as had previously been thought. However, the ONS went on to reveal that its calculations had shown that the one economic dip which the UK suffered during the aftermath of the 2007/08 global credit crisis was deeper than had previously been estimated, with a drop-off in activity levels from peak to trough of 7.2% versus a previous best guess of 6.3%.

The second piece of apparently positive news for Britain’s economy yesterday came in the form of the announcement from the nation’s coalition government that it would be instigating a five year infrastructure spending plan. The Keynesian pump-prime style splurge will see a hefty £100bn investment in the UK’s roads, housing and power stations in the lead-up to 2019 in an effort to get Britain working again. However, market participants remained unconvinced by the plans, sending the Pound to euro exchange rate (currency : GBP EUR) down from an intraday high of almost 1.1800 to below the 1.1700 level by the time North America’s markets closed for business.

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