It has been announced that the UK economy grew in the fourth quarter of 2015 by 0.5% which was positive news for Sterling exchange rates (GBP) which strengthened in yesterday’s trading session as a result. This news means that the UK economy grew by 2.2% in total through 2015 which is a positive figure and one that should bring some reassurance for UK retailers, manufacturers and perhaps most importantly for UK consumers. The UK is now one of the fastest growing economies in the Western world, something I am sure that George Osborne and the Bank of England will take some solace from.
However, while this is positive news for the UK there was a slight dampener added by the International Monetary Fund (IMF) who stated that the strong growth the UK has witnessed is likely to slow until the global economy improves. As discussed in yesterday’s USD currency report, problems in China have started to filter through to other economies and has resulted in a slow down in growth across the world and so the UK will be one of many countries that are likely to be operating in a more challenging environment than we have seen for the last couple of years.
Since the start of the year the Pound has been under pressure and we have seen it weakening against many of the major currencies and while the positive Gross Domestic Product figures yesterday help, I do not expect Sterling to recover to the same sort of levels we saw for much of last year. In fact, in my opinion I would expect Sterling to hold relatively steady at these current levels unless there are further developments in China and other leading economies that cause shock waves in the global economy. With no sign of an interest rate hike in the UK, a challenging economic environment and the Eurozone (the UK’s largest trading partner) under pressure, I believe the UK will find it difficult to match the growth we saw in 2015 and therefore the Pound will hold around its current levels.