British pound is experiencing some losses against the US dollar, with losses of 0.1% at approximately 7:20 a.m. GMT.
At the same time, the euro continues to advance against the pound and reaches its highest levels in about ten days, with gains of about 0.14%.
The pound’s losses today against major currencies came with the contraction of the British economy in the last fourth quarter and the sharp decline in construction outputs.
Today’s data may put more pressure on monetary policy makers at the BoE to cut interest rate soon in contrast to the influx of strong economic data from the US economy, which dashed hopes that the Fed would cut rates next March.
While this expected discrepancy in the speed of interest cuts in both economies may put more pressure on the pound to decline. The fourth quarter witnessed a contraction in the outputs of all major sectors, whether services, production, or construction, in addition to a general decline in spending from both households, the government, and net trade.
According to preliminary data, GDP contracted faster than expected by 0.3% during the fourth quarter compared to the previous quarter. While the reversal of growth recorded in the third quarter turned into an unexpected contraction of 0.2% in the fourth quarter compared to the same quarter of the previous year. On a monthly basis, it contracted by less than expected at 0.1% in December.
As for the entire year 2023, the British economy avoided contraction and recorded growth of 0.1% compared to the year 2022.
The construction sector was the sector that declined the most, with a sharp decline in new business, which was exposed to pressure mainly due to the contraction of private housing outputs by 8% during the last quarter compared to the third quarter, which had declined for five consecutive quarters. In contrast, over the entire year 2023, the construction sector grew by 2%.
Moreover, service outputs have contracted for three consecutive quarters due to the pressure of declines in wholesale and retail sales, services facing the consumer and education as well.
While manufacturing output and industrial production also contracted in the last quarter, they accelerated faster than expected and noticeably in December in particular.
