Markets

Poor GDP growth hits sterling “like a bucket of cold water”

Sterling fell to its lowest level since March today following the release of bleak statistics for the UK's GDP in the first quarter.

ONS figures showed that the economy grew just 0.1 per cent in the first quarter below forecasts, representing the slowest pace of growth since the fourth quarter of 2014.

But the ONS also warned that March's 'Beast from the East' was probably not the reason for the slow down in growth.

Read more: Sterling slide continues as Carney shrinks expectations of May rate hike

Sterling was down 1.12 per cent against the dollar, and 0.88 per cent against the Euro.

As the pound fell, shares in a number of American companies got a boost, as the FTSE 100 went up 0.4 per cent.

David Lamb, head of dealing at FEXCO Corporate Payments said that Sterling confidence had dropped with "balloon-like ease."

"No amount of squabbling over how much of a factor the extreme weather was can mask one blunt truth – Britains economy is slowing badly," he said.

"With separate data showing that the number of companies going to the wall – and individual insolvencies – is up sharply, this throws an almighty spanner into the narrative of the UKs steady upward progress.

"All this has hit sterling like a bucket of cold water. After a month of at times frothy exuberance, sterling is ending April on a sharply downward trajectory.

"Sterling confidence has been popped with balloon-like ease."

Ben Brettel, senior economist at Hargreaves Lansdown added:

Unsurprisingly sterling fell sharply on the news, losing around three-quarters of a cent against the dollar and half a cent against the euro as traders hastily revised their interest rate expectations.

Connor Campbell, financial analyst at Spreadex commented: "Both the pound and the euro will be hoping the dollar gets a taste of its own medicine following the US Q1 GDP reading.

"Analysts are expecting a rather sharp decline between the fourth and first quarters, with forecasts pointing to a drop from 2.9 per cent to 2.0 per cent (at the annualised rate). The Dow Jones could also do with the greenback losing some of its gumption given that the futures have the index slipping under 24,300."

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