UK Finally Exits Recession, but Pound Tumbles

After five consecutive quarters of negative growth, data has shown that the UK economy is now expanding.

Britain has lagged other G20 economies in recovering from the recession, failing to emerge from recession in either the second on third quarter of last year. Data has shown that the UK economy grew by 0.1% in the fourth quarter of 2009. It did undershoot forecasts by 0.3%, and has raised concerns that the economy is still struggling.

Both France and Germany both showed growth of 0.3% when they first returned to growth. The signs still suggest that Britain is lagging other economies in its recovery.

Duncan Higgins, senior analyst at Caxton FX, said: “There can be no doubt that growth figures are an important boost to the UK’s recovery hopes, however there are still severe headwinds to be faced. There is has been little data yet this month to suggest strong growth in the first quarter of 2010. With credit conditions yet to ease, it will be sometime before the Bank of England can realistically consider tightening policy.”

Higgins continued: “In response to the news, the pound has tumbled from its highs. Although the UK is out of recession, the figure will be subject to change and there is little room left for a downward revision. Investors had priced in a stronger figure and so the markets have immediately reacted, with the pound currently down over a cent from its highs against both the euro and the US dollar.”


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