Sterling Lifts as UK 3Q10 GDP Confirmed at 0.8%

A second estimate of the UK’s third quarter gross domestic product (GDP) has confirmed a growth rate of 0.8%, in line with the surprisingly positive preliminary figure, according to Caxton FX.

Rumours had been circulating that the preliminary estimate had factored in an overly optimistic contribution from the construction sector, but these appear to have been unfounded. The breakdown shows better support from export sales with the three key sectors – manufacturing, services, and construction – showing positive growth. At this stage, heading into a period of tough austerity, it would appear that the UK economy is exhibiting a certain resilience, which is lifting market confidence.

Duncan Higgins, senior analyst at Caxton FX, said: “The figure will add to hopes that the UK economy is on course to post above forecast growth for this year. The next couple of quarters will present some tough obstacles to growth but arguments alluding to a return to recession seem to be losing credibility.

“When looking at UK figures, investors are weighing up the possibility of further quantitative easing. To be honest, UK economic growth would need to be off the scale before the Bank of England would genuinely entertain taking QE [quantitive easing] off the table. The pound has received a slight boost but it’s the focus on Ireland that is continuing to dominate market flows.”

Continuing fears that Ireland’s bailout will fail to prevent the debt crisis from spreading is weighing heavily on the euro, which looks vulnerable to further falls.


Related reading