United Kingdom GDP declines by 0.1% MoM in April, as expected

Lallalit Srijandorn FXStreet

The UK Gross Domestic Product (GDP) contracted by 0.1% MoM in April, following a 0.3% rise reported in March, the latest data published by the Office for National Statistics (ONS) showed on Friday.

The market forecast was for a 0.1% decline in the same period.

Meanwhile, the Index of Services (April) rose 0.8% 3M/3M versus March’s 0.8%.

Other data from the UK showed that monthly Industrial Production came in at 0% MoM in April, while Manufacturing Production increased by 0.4% during the same period.

Market reaction to the UK data

The Pound Sterling remains weak following the UK data. At the press time, the GBP/USD pair is gaining 0.13% on the day to trade at 1.3402.

GDP FAQs

What is GDP and how is it recorded?

A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.

How does GDP influence currencies?

A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.

How does higher GDP impact the price of Gold?

When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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