UK economic growth faster than expected in 2014

Enrique Díaz-Álvarez01/Apr/2015Currency Updates


Sterling rose throughout Tuesday against its major peers after strong growth figures and ended the day 0.5% higher on the Dollar.

The Conservative party were given a major boost yesterday ahead of the election, after ONS markedly revised upwards its measure of UK economic growth for quarter four last year. The economy grew by 0.6% on the previous quarter, revised up from 0.5%, meaning overall growth for last year unexpectedly climbed to 2.8%, from the initial 2.6% estimate. An expansion of production and services, combined with a strong performance from exports, caused the significant revision, and marked the highest yearly growth since 2006. The Office for National Statistics also revealed that financial well-being of households in Britain improved last year, back to where it was before the financial crisis.

In a busy morning for data releases in the UK, the current account deficit surprised on the downside, reaching a new record high in the process. The deficit in Britain’s trade and overseas investments is now 5.5% of GDP, the largest deficit since records began in 1948.

Just the one major data release in the UK today, with Markit’s manufacturing PMI for March.


The single currency continued its descent back towards its multiyear low, down by 0.4% on the US Dollar.

The Eurozone continues to show encouraging signs of economic improvement after the German rate of unemployment declined to a record low in March. The number of people out of work in Europe’s largest economy fell by 15,000 to a seasonally adjusted 2.798 million, unexpectedly dragging the unemployment rate down to just 6.4%. While on a one month lag, the overall Eurozone unemployment rate also fell from a revised 11.4% to 11.3% in February. German retail sales also remained strong, mostly in line with expectations, climbing by 3.6% year-on-year. While less than last month’s reading, it marked the largest February expansion in sales in fifteen years.

Falling consumer prices in the Eurozone eased in March according to Eurostat. Prices fell by an annualised 0.1% last month having declined by 0.3% the month previous. This was mostly due to a modest rebound in energy prices, which were down 5.8% in March compared to 7.9% in February and 9.3% in January. In other news, hopes of a pre-Easter breakthrough in negotiations over reform plans between Greece and its creditors faded yesterday, with European Council President Donald Tusk saying it could take until the end of April.

The ECB’s non-monetary policy meeting at 8am this morning will be followed by a number of manufacturing PMI releases at around 9am London time.


A mixed day for Greenback against its peers saw the US Dollar index trade within a narrow band to finish the London session 0.2% higher.

Expectations for future job and income prospects helped boost the level of consumer confidence in the US economy in March. The consumer confidence index, as measured by the Conference Board, soared above forecasts to just shy of a seven year high from a revised 98.8 to 101.3. Consumers in the US are currently enjoying a windfall from plunging gasoline prices, which have increased disposable income and boosted spending power. Elsewhere, manufacturing activity in Chicago expanded modestly in March. The Chicago Purchasing Managers’ index climbed from 45.8 in February to 46.3 this month.

There were more hawkish words from a Federal Reserve member yesterday, after Jeffrey Lacker claimed there was a “strong case” for a June interest rate increase, in line with our long standing expectation.

Wednesday looks set to be a busy day in the US economy. Mortgage applications, manufacturing growth and construction spending data releases could all cause moderate volatility in the Dollar.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.