Pound US Dollar Exchange Rate News: GBP/USD Rangebound as UK GDP Q4 Misses Forecast

February 11, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Rangebound as UK GDP Q4 Misses Forecast

GBP/USD Trading Flat as UK GDP Q4 Misses Predictions

The Pound US Dollar (GBP/USD) exchange rate is trading in a narrow range today as the UK GDP for the fourth quarter fell short of expectations.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3551, with minimal market movement from today’s opening levels.

Pound (GBP) Mixed as GDP Q4 Underperforms

The Pound (GBP) is rangebound against the US Dollar (USD) this morning as the UK’s Q4 GDP printed modestly below expectations.

Expected to rise to 1.1%, the GDP instead remained unchanged, holding at a downwardly revised 1% during the last three months of 2021.

As coronavirus led to more people visiting their GP’s as well increased test and trace resources and the vaccination programme, health and social activities were the largest contributors to the economic expansion.

In addition, exports rose to 4.9%, further supporting the economy, whilst imports decreased by 1.5%.

Overall, 2021 saw the economy grow by 7.5%, following 2020’s record fall of 9.4%, and is currently 0.4% below the pre-pandemic levels.

Darren Morgan, ONS director of economic statistics, said:

‘If you look at how the UK economy grew in 2021, compared with 2020, then yes, the 7.5% we published this morning means the UK is the fastest growing economy in the G7.

‘If you look at where the UK economy is now, compared to its pre-pandemic level, which I know a lot of people do for a broader picture of the economy, the UK is middle of the pack compared with the G7.’

On the other hand the Pound is gaining some support from upbeat industrial production figures this morning.

Industrial production rose by 0.3% in December, down from November’s 0.7% but besting forecast it would slow to 0.1%.

Moreover, the Bank of England’s (BoE) Governor, Andrew Bailey, delivered a speech regarding the resilience of the financial system last night.

This suggests that BoE will continue its current trajectory of rate hikes which is helping to limit the downside potential of the Pound this morning.

US Dollar (USD) Directionless as Geopolitical Uncertainty Mounts

The US Dollar (USD) is mixed against the Pound (GBP) this morning as President Biden tells US citizens to leave Ukraine immediately.

Rising tensions between Ukraine and Russia are causing global concern. Today, President Biden has warned that ‘things could go crazy quickly’ and that he would not send troops in to save US citizens should Russia invade.

Biden said:

‘We're dealing with one of the largest armies in the world.

‘That's a world war when Americans and Russia start shooting at one another. We're in a very different world than we've ever been.’

Although Russia is currently denying any plans to invade Ukraine, over 100,000 Russian troops are stationed along the border.

GBP/USD Exchange Rate Forecast: Fed Monetary Policy Report in Spotlight

This afternoon, the publication of the Federal Reserve’s monetary policy report may weigh on the Pound US Dollar exchange rate.

Should the Fed signal its desire to aggressively tighten monetary policy then the USD is likely to gain some traction.

Meanwhile the focus for GBP investors turns to next week’s jobs report. Unemployment in the UK is expected to have held at an 18-month low of 4.1% in December, which could reflect positively on Sterling.

However the accompanying average earnings release could limit the Pound’s upside potential as another fall in wage growth is likely to revive concerns over the UK’s impending cost-of-living crisis.

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TAGS: Pound Dollar Forecasts