UK Gross Domestic Product was revealed to be up 0.5% in the third quarter of the year which was better than the expected 0.3%. This cause the GBP/EUR to jump half a cent however it does raise some more interesting questions for the future.
The Treasury produced post-Brexit scenarios before the vote suggesting that the Q3 GDP would be -0.1% if we left the EU. They also produced a severe shock analysis which put the fallout nearer the economy shrinking by -1.0%. Today’s data obviously doesn’t suggest the UK is in the clear but it does raise the question about the severity of the predictions.
Bank of England Interest Rate Decision
The Monetary Policy Committee meet next week and there was talk of a second interest rate cut. However, the UK data suggests that might not be necessary just yet and that holding off could provide a better picture of the economy. Whilst it seems likely there will be a further interest rate cut, this may not now happen until the New year. In my opinion if they were to cut rates again in the next few weeks, we could see the Sterling Euro rate fall to near parity.
Nissan announces new models to be built in UK
This afternoon Japanese car manufacturing giant Nissan announced they would build their new cars in the Sunderland factory. They currently employ 7,000 people in the area and this is one of the first major deals being struck since the Brexit. Nissan’s bosses had previously been sceptical of the vote fallout and were vocal in declaring they may have to move. However they have received reassurances from the UK Government and have decided to remain.
In the next few days it may be possible for the GBP/EUR rate to move back towards the high 1.12’s even potentially breaking 1.13.