Wednesday 24th April 2013
Good afternoon everyone. I'm only putting up a short post today ahead of tomorrow's key UK GDP figures. I thought I would outline what I think may happen depending on the actual numbers that are released tomorrow at 09:30am.
Let's start at the beginning. What is GDP?
Firstly, what is GDP? You can read a comprehensive outline here on the BBC website. In a nutshell, it's a measure of the economy in one simple number. If the GDP measure is up on the previous three months, the economy is growing. If it is negative it is contracting. And two consecutive three-month periods of contraction mean an economy is in recession.
How could the GDP result affect exchange rates?
Now, I'm sure regular readers are now getting a little bored of me talking about the GDP numbers, so you will be pleased to know the final result will be announced tomorrow morning at 09:30am! Markets have been waiting in anticipation for the result, and so we can finally put to bed the question of whether or not we're in recession.
To summarise, in the last 3 months of last year, the UK's GDP shrank by 0.3%. If the first 3 months of this year also show a decline, then it means the UK is officially in recession for the 3rd time in as many years.
A recent estimate showed that the economy may have actually shown growth of 0.1%. So not exactly a huge increase, but if confirmed it will mean the UK has avoided recession. So what would happen if the numbers are as forecast, or different than forecast?
Markets generally price in forecasted figures in advance, so the number of 0.1% growth will already be reflected in the current exchange rate. That's why we've seen the Pound make some gains in recent days. So if the number is as expected at 0.1%, then I wouldn't expect huge movements in the rate. We may see some modest strengthening of Sterling, but don't expect rates to shoot up to €1.20.
If the figure shows a decline and confirms the UK is back in recession, then I would expect the Pound to fall, potentially by some margin. So there is the risk exchange rates could take quite a hit tomorrow if the numbers are poor.
Finally, the number could show growth of more than 0.1%, in which case I would expect exchange rates to rise.
Whatever happens tomorrow, I do expect rates to move in one direction or the other.
Many clients are booking their currency today to avoid losing out if the market starts to move the wrong way. Send a free enquiry to me today to find out more about the rates that I can source for you - our rates are up to 5% better than banks, so you may be surprised in how much you could save.
Click here to send me a free enquiry on exchange rates.
What next after the GPD numbers?
We can also start to look forward and talk about something else! It will finally confirm the direction the UK economy is taking, and so I would expect once this release is over and done with, focus will return to the EU debt crisis, and further economic released from the UK will be studied in detail to see how the economy is faring.
I personally expect the Pound to make gains against the Euro in the medium to longer term, but in the short term things may get worse before they get better.
Getting the best exchange rates
If you need to buy or sell currency in the next 2 years and want to achieve the best exchange rate possible, then send me a free enquiry today. I can discuss your requirements, explain the different options you can consider, and help you make an informed choice on when to fix your rate.
When you decide to do this, the rates I can source are significantly better than banks offer. So find out today how we can help you.
It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.
Labels: Best Exchange Rates, currency forecast, EU Debt Crisis, UK GDP, UK recession