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Positive UK GDP helps the Pound against the Euro

UK GDP figures gave the Pound a lift against the Euro on Friday morning coming out at 1.8% which was an improvement compared to the previous quarter. However, the increase in Sterling was limited as the figures came out as expected.

One of the main reasons for the increase in GDP for the first quarter of 2019 was because this was the period when the Brexit deadline was due to take place on 29th March. Huge amounts of firms were stockpiling goods in the event that the UK would leave the European Union and so the figures were arguably inflated so this lift in GDP could be relatively short-lived.

With the Brexit deadline now being extended until the end of October we could also potentially see another strong third quarter for UK GDP if the same idea of stockpiling happens once again. However, as we are now into the second quarter of 2019 I think this could be a rather worrying period when the figures are released in a couple of months.

The other bit of good news on Friday was the release of UK Industrial and Manufacturing data which came out a lot higher than expected.

After having a difficult week for the Pound vs the Euro it managed to stabilise at just above 1.16 towards the end of Friday’s trading session.

Next week brings with it little in terms of economic data for the UK so eyes will turn towards what is happening on the continent. On Tuesday morning German inflation figures are due out and they have been falling recently and are predicted to fall once again.

As Germany is the Eurozone’s leading economy the impact of negative data will often negatively affect the value of the Euro so Tuesday could be a good short term opportunity if you’re looking at buying Euros in the near future.

Indeed, if inflation falls a central bank will often consider cutting interest rates in order to combat the problem. Therefore, if inflation continues to decrease then this could put pressure on the European Central Bank to consider what to do in terms of monetary policy when it meets next month.

By Tom Holian

Source: Pound Sterling Forecast