HomeBusinessChallenges for the pound after inflation and GDP decrease

Challenges for the pound after inflation and GDP decrease

All important publications from Great Britain of the past two weeks were at least somewhat surprising, with inflation and GDP unexpectedly declining, while the change in the number of claimants was much better than the consensus. However, sentiment remains weak because traders are concerned about the British government loans. This article recently summarizes important news from Great Britain and then briefly looks at the graphs of GBPUSD and EURGBP.

The annual total inflation in Great Britain fell to 2.5%in December, compared to the expected 2.6-2.7%:

Although it is too early to say with some certainty that inflation will stabilize below 3%, it seems that upward pressure has decreased somewhat in recent months. The prospects for consumers demand are generally mixed, despite poor trust. Inflation for food, alcoholic beverages, restaurants and hotels has all decreased in the past month. The total inflation of 2.5% on an annual basis for December corresponds to the predictions of the Bank of England.

The final British GDP for the third quarter was nihil, slightly lowered compared to the first estimate of 0.1%. A weaker growth after the relatively strong first way out from the technical recession in the first quarter of 2024 indicates that the Bank of England may have more room this year to lower interest rates than, for example, the FED. The majority of expectations points in the direction of around 0.65% as total of the cutbacks by the BOE this year, but that will most likely change in the coming months as new data will become available.

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The job report of January 21 from Great Britain was generally much stronger than expected. Although unemployment rose to 4.4%in November, the change in the number of applicants was very positive:

The latest figures from the Office for National Statistics show that only 700 new applicants were added in December compared to the expectations of more than 10,000. The number for November was also sharply adjusted down to negative 25,100; The initial figure was positive 300. That is the biggest decrease in the number of claimants in one month since May 2023.

The greater than expected budget deficit in Great Britain last month is probably the main reason that Traders did not respond stronger to the good job report. The government loans in December amounted to around £ 17.8 billion, which was around £ 10 billion more than in the same period in 2023.

The inauguration of Donald Trump and the subsequent fast implementation decisions provided some positivity in the forex markets, since the new president did not immediately impose extra rates. Although the expected rates will probably hit the EU, Canada and Mexico much harder than Great Britain, traders may remain cautious and be wary of sudden movements in the coming weeks.

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