The GBP EUR exchange rate was slightly lower after GDP figures disappointed. Traders expected a reading of 1.5% for the quarter to September but the actual result was 1.2%. I noted recently the Bank of England had lowered its forecast for growth at last week’s meeting and that would buffer prices.
The GBP to EUR trades at 1.1670 after an attempt to take the 1.1700 level earlier in the day.
UK economy closer to pre-pandemic output level
The UK economy is close to recovering its pre=pandemic levels of output, with city analysts applauding the recovery.
Official figures showed the economy growing at 1.3% between July and September. That was lower than expected and well behind the 5.5% spurt enjoyed in the second quarter as the nation bounced out of lockdown.
But the 0.6% growth in September was better than forecast, offering hope that October and November will also be strong. The UK is now on track to see growth where it was prior to the pandemic at the end of 2019.
Simon French, chief economist at Panmure Gordon, said: “It’s quite an achievement really. The Chancellor intervened to prop up the UK economy on an unprecedented scale – spending in excess of £400 billion. The result has been a very fast economic recovery. Whilst the Bank must remain vigilant on inflation — set to rise to around 5% – it is also giving the recovery in both output and jobs every chance. For many Britons that is a rather better policy mix than we saw after the Global Financial Crisis.”
The slower pace of recovery over the summer was put down to supply chain issues that have hurt retailers and other businesses including car makers.
Chancellor Rishi Sunak said:
“The economy continues to recover from Covid and thanks to schemes like furlough, the unemployment rate has fallen for eight months in a row, and we’re forecast to have the fastest growth in the G7 this year.”
Growth lifted for 19 European countries, Irish growth to double
The European Commission raised its growth forecast for the year for the 19 countries using the euro, stating on Thursday that the economy was bouncing back from the worst of the lockdowns as services restarted.
However, the group lowered its outlook for next year, warning that high energy prices would hit utility bills and household spending. The economy also faces other obstacles in the supply chain.
At nine per cent, Estonia is heading for the second highest level of economic growth in the European Union in 2021, lagging only Ireland, where the economy is forecast to expand 14.6%.
However, analysts warn that the forecasts depend heavily on two factors: the path of the virus and the pace at which supply chains adjust to the rebound.
“The European economy is moving from recovery to expansion but is now facing some headwinds,” says European Economy Commissioner Paolo Gentiloni.”
The GBP v EUR is on the back foot and has the looming threat of the Article 16 issue.