The GBP EUR exchange rate was 0.54% higher after the release of GDP data for March. Data released by the Office for National Statistics on Thursday showed that GDP fell by 0.1% in the month, which was slightly worse than the 0% growth forecast.
The GBP to EUR trades at 1.1713 as it tries to hold onto gains on another bounce from losses.
UK economy shrinks in March as GDP is hit by cost-of-living issues
The UK economy contracted in March after the cost-of-living crisis started to bite on families and threatened to push the country into recession.
New data from the Office for National Statistics on Thursday showed that GDP fell by 0.1% for the month, slightly worse than the 0% growth forecast. The UK’s dominant services sector shrank by 0.2% in March, which was the key contributor to the drop in growth.
Output in consumer-facing services fell by 1.8%, following 0.5% growth in February. GDP for February was also revised down to 0%, from the 0.1% first projected.
For the quarter, the UK economy grew by 0.8% between January and March, down from growth of 1.3% in the previous three months.
Darren Morgan, director of economic statistics at the Office for National Statistics, said: “The UK economy grew for the fourth consecutive quarter and is now clearly above pre-pandemic levels, although growth in the latest three months was the lowest for a year.”
“This was driven by growth in a number of service sectors as the economy continued to recover from Covid-19 effects, including hospitality, transport, employment agencies and travel agencies. There was also strong growth in IT,” he added.
“Our latest monthly estimates show GDP fell a little in March, with drops in both services and in production. Construction, though, saw a strong month, thanks partly to repair work after the February storms.”
Energy markets still on tenterhooks over Russian supply
Europe saw another abrupt delay to its supply of natural gas from Russia this week as the continent tries to diversify.
Despite two months of war and bitter relations, gas from Russia has continued to flow westward, much of it via pipelines in Ukraine. But this week, Ukraine’s gas transmission system operator said it had suspended gas shipments through the Sokhranivka transit point, which processes as much as one third of Russian gas flowing through Ukraine to Europe.
The Ukrainian operator blamed “interference by the occupying forces” in its announcement. European natural gas prices rose 5% on Wednesday but have since fallen back to early week levels.
However, healthier gas storage levels, mild weather and a record volume of LNG imports into Europe last month have cooled prices. The recent shutdown is another reminder of the energy threat, just two weeks after Russia halted gas shipments to Poland and Bulgaria.
Friday will see inflation numbers for France and Spain, alongside industrial production for the Eurozone. Ireland is struggling with the same cost-of-living issues as the UK with an inflation rate of 7% seen in April, according to Thursday’s statistics.