The British Pound to US Dollar saw a sharp intra-day fall from 1.3841 by 0.49% on Tuesday, August 17, 2021, on weak data and a stronger US Dollar.
British Pound to US Dollar at Three-Week Low
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UK GDP saw an increase of 4.8% for the second quarter ending June 2021. It came after the easing of coronavirus restrictions in the country.
Services, construction, and production show good results for the second quarter. In particular, the accommodation and healthcare sector shows improvement.
The US Dollar in the forex markets saw a sharp increase to 92.90, an increase by 0.32% on Tuesday, August 17. The greenback shows signs of strengthening for the second consecutive day, which has brought the British Pound to US Dollar lower. One USD in Pound Sterling is at 0.73 on Tuesday, August 17.
The forex rates of the Sterling show a downward momentum after losing its key support levels at 1.4000 levels. British Pound to USD may move lower in the days to come, say experts. GBP/USD foreign exchange rate is currently trading at support levels at 1.3751 on Tuesday, August 17.
UK GDP Lower by 4.4% from Pre-Pandemic Levels
Britain’s GDP grew by 1.0% in June. The performance of the healthcare sector and hospitality sectors are better than other sectors in the country. The GDP is a strong indicator and the primary gauge of any country.
Though growth is in line with expectation, it is lower than the forecast figure at 5%. The currency trading of the Pound to the US Dollar is on a downward trajectory for the past three weeks.
The UK GDP is also lower by 4.4% from the pre-pandemic period during the last quarter of 2019. The British economy fell almost 10% in 2020. The third wave which hit the economy in 2021 was the cause of further delay in the economic growth in the country leading to a slump in the foreign currency exchange. Month-on-month, growth in the United Kingdom is stronger in June at 1.0%, higher than predictions as 0.8%. The third lockdown brought a slowdown in the economy, leading to lower forex rates of the Pound to US Dollar.
The UK Unemployment Rate is at 4.7% for the second quarter of 2021, while previously it was 4.8% in the first quarter. It is another reason for the lower British Pound to USD. Claimant Count Change fell by 7.8K in July 2021, while it was at -136.1K previously, as the number of people who claim unemployment benefits dropped for the fifth consecutive month in the UK. It is positive for the Pound to US Dollar exchange foreign currency.
The furlough scheme in the UK will end by September 2021. It will reveal the true position of the state of the economy, say experts. There will be no further extension to the furlough scheme, says Finance Minister Rishi Sunak.
Bank of England Keeps Lending Rates at 0.1%
BoE leaves lending rates unchanged at 0.1%. Lending rates were at 0.1% in March 2020. It remains at historic lows, as economic conditions are below normal levels. The first tightening of monetary policy will happen in 2023. The unwinding of asset purchases will take place from 2025 predict, economists.
Bank of England may resort to a modest tightening of its stimulus program by the end of 2021 predict, officials. For now, the stimulus will help to bring back growth into the economy. The quantitative easing program for £895 billion will continue, say policymakers. Inflation has to come to the 2% target. The forex markets are moving lower with a weaker British Pound.
UK Service Sector Growth
The service sector in the UK shows good growth for the second quarter by 5.7%. It includes wholesale and retail trade, food service, education, and accommodation. However, it is below the Q4 2019 levels by 3.5%.
The service sector, which includes healthcare and hospitality, saw a surge of 1.5% in June and an 87% increase for Q2, 2021. The Office for National Statistics says that growth was highest during this period in healthcare. Food and beverage consumption saw a rise in consumption. Restaurants have a higher inflow of people after the easing of the lockdown restrictions.
The consumer price index is on the rise with higher prices and rising energy costs. Asset Purchase Facility in Britain remains unchanged at 895 billion.
The unemployment rate has gone down for the past six months to 4.8%. We have good news from the declining unemployment rate, says Bailey. He further states that the economy will return to pre-pandemic levels by the end of the year, as growth stabilizes and fiscal policy tightening happens.
The US economy is returning to normal, while the Euro region is showing traces of recovery. The economies of Italy and Spain have the highest growth, but they remain lower than the pre-pandemic levels in GDP. The UK economy remains 2.2% lower than in the pre-pandemic period.
The US Dollar Index is at 92.94, moving higher from the 92.50 levels. The GBP/EUR currency pair is at 1.1723 levels.
