Pound ends lower again as UK growth disappoints

Enrique Díaz-Álvarez29/May/2015Currency Updates


The UK currency ended the day lower against the Dollar for a fourth straight day this week, 0.4% down on Thursday and now 1.2% lower for the week after lower than forecast growth data

Economic growth in the first quarter of the year disappointed market expectations yesterday, remaining at 0.3% after forecasts of a slight upward revision. According to the ONS, a sharp increase in imports by 2.3% and lagging exports which fell by 0.3% in the first three months of the year, led to a worsening in the net trade position. This, coupled with a slowdown in the services sector which expanded at its slowest rate since 2012, confirmed that the economy grew at its weakest rate in nearly two years in the first quarter. Consumer spending grew by a less than forecast 0.5%, although encouragingly business investment reached its highest level in a decade. At its latest inflation report, the Bank of England mentioned it expected growth to be revised by to 0.5% when all data becomes available.

No major data releases in the UK today. Sterling will likely remain under pressure on Friday from yesterday’s weaker-than-expected growth figures.


Concerns in Greece continued to weigh on the Euro, which slumped by 0.1% versus Greenback yesterday.

Thursday was another day of conflicting viewpoints as far as Greece was concerned. The Greek government claimed it hoped for a deal with its creditors by Sunday, denying any plans to bundle IMF payments into one lump sum. However, once again the European Commission dampened hopes, stating further progress was required. The country’s lead negotiator warned that a “high-level” political agreement could be needed to drive through the deal in time to meet its IMF debt obligations. Earlier in the day, the ECB warned that in their twice-yearly Financial Stability report that risks from Greece for the Eurozone had increased sharply, although Vice President Constancio claimed that a Grexit was not on the cards, although it could default on its bailout loans.

In terms of data released yesterday, consumer confidence remained unchanged this month, while industrial confidence improved marginally from -3.2 to -3.0. The European Commission’s economic sentiment indicator also remained unchanged at 103.8 in May.

Greece will remain in focus today as the country edges closer to the crucial 5th June IMF payment deadline. We’ll also see a number of smaller data releases in the Eurozone, including Italian growth and inflation figures.


The US Dollar ended higher once again versus its major peers on the back of some hawkish words from Fed officials, ending the session 0.2% up.

There was more promising data in the US on Thursday. The number of pending home sales, a forward-looking gauge of home purchases, climbed for the fourth consecutive month in April, in the process reaching its highest level in nine years. According to the National Association of Realtors, pending sales increased by 3.4% month on month, marking an increase of 14% on a year previous. Additionally, initial claims for jobless benefits remained below 300,000 again, despite increasing marginally last week. The four-week moving average rose to 271,500.

Earlier, there was some hawkish words from Federal Reserve Bank of San Francisco President John Williams, who claimed the US would likely hike rates in 2015, as growth prospects rebound later in the year. Williams expects the economy to grow around 2% this year, while claiming unemployment could decline to below 5%. Former Fed Chair Bernanke also spoke at an event in Sydney, saying that there was plenty of scope for economic growth due to a recent improvement in consumer optimism.

All eyes today will be on revised growth figures for the US at 1.30pm BST.

Rest of the world

The South African Rand was one of the day’s worst performers yesterday, touching a five week low on the back of Dollar strength. Russia’s Ruble fared even worse, down by over 2% to a one-month trough against Greenback.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.