Private DCN Private DCN - Sterling

Sterling remains vulnerable as data provides a mixed picture

By Ricky Bean February 23rd, 2017

Economic data from the UK was representative of a goldilocks economy, not too hot, nor too cold.

Starting with the positives, the second reading of the final quarter of Gross Domestic Product (GDP) was revised upwards to 0.7% from 0.6% as the economy grew at a faster pace than expected. The increase was largely due to the upbeat manufacturing sector. Despite this, sterling (GBP, pound) initially found itself under some pressure, before regaining its losses. Another key piece of economic data was released in the form of the business investment figure. Unlike GDP, which is backward looking, business investment is forward looking in terms of the effect on the economy. This number fell by 1% against an expectation that it would hold a constant level, after the previous reading was revised downwards. While the figure went against the grain, it is not that surprising considering the uncertainty surrounding Brexit. What it does highlight is that business confidence is being undermined by the ongoing uncertainty, which could have lasting effects on the economy.

Looking to the day ahead, it is fairly quite in terms of economic data. Political drivers will continue to remain the key focus for the economy and sterling. Anything untoward with regard to the tone of Brexit could have an effect on the pound (GBP).