By Claire West
Data revealed today showed that the UK GDP for the first quarter has been revised to 0.3%, after an initial estimate at 0.2%.
However, despite today’s upward revision, the figure is still below the 0.4% that experts had expected to see. Consequently the immediate reaction in the markets has been relatively muted with focus remaining fixed on developments within the eurozone.
Duncan Higgins, senior analyst at Caxton FX says, “The upward revision is certainly a positive for the UK economy, but the figure is still disappointing. There will need to be a raft of strong figures before we see a significant shift in sentiment toward the British economy.”
Taking in to account the huge spending cuts in the pipeline, economic conditions are unlikely to see a dramatic pick up.
“On the one hand, the market has met the spending cuts with approval, supporting Britain’s attempts to address the deficit. On the other hand, there is growing concern over the impact that these cuts will have on the prospect for economic growth,” explains Higgins.
Sterling’s broader market movements are continuing to be dictated by developments from within the eurozone. Following the recent news that regulators seized a Spanish bank, the UK currency is trading back above €1.17 at present. Against the dollar, the pound is struggling and the risks remain heavily to the downside.
Duncan Higgins adds, “The underlying theme is still one of risk aversion, and the nervousness being instigated from the eurozone could see sterling head down to $1.40 against the dollar.”