British Pound Cements Gains on Robust Economic Growth Data

• Pound to Euro Rate Today: 1.1755, day's best: 1.1806
• Euro to Pound Sterling Rate Today: 0.8507, day's best:  0.8519
• Pound to Dollar Rate Today: 1.2611, day's best: 1.2674

The Pound Sterling rally - in place since mid-January - was underpinned on Thursday January 26 with the release of some better-than-forecast GDP statistics from the ONS.

GDP data for the fourth quarter 2016 showed growth of 0.6% - equalling the growth for the third quarter. This is ahead of analyst expectations for growth of 0.5% to be announced.

In fact the UK economy grew faster in the six months following the Brexit vote than it did in the six months preceeding the vote.

Annualised GDP reads at 2.0% confirming the UK as one of the fastest-growing major economies in the world.

"Strong consumer spending supported the expansion of the dominant services sector and although manufacturing bounced back from a weaker third quarter, both it and construction remained broadly unchanged over the year as a whole,” says ONS Head of GDP, Darren Morgan.

Looking ahead, most analysts do expect UK economic growth to slow.

"The strong end to last year provides plenty of momentum heading into 2017. And while growth looks set to ease this year, the beneficial effects of the fall in the Pound should help to ensure that the slowdown won’t be too severe," says Ruth Gregory at Capital Economics.

Pound to Hold Gains

Although there has been no major upside impetus for the Pound provided by the data release, the beat on expectations should solidify the Pound’s recent relief rally and potentially take us to the near-term targets we have set out.

“The UK sees Q4 GDP this morning as well as CBI retail sales for January. The more these support the break higher in yields, the less they help Sterling bears,” says Kit Juckes at Societe Generale.

“GBP/USD is up in rather thin air here, but needs a reason to fall back that we can't see yet,” says Juckes.

Analyst Robin Wilkin at Lloyds Bank Commercial Banking meanwhile warns the Pound is reaching the upper limits of its ranges against the Euro and Dollar.

"With cable approaching recent range highs, our intra-day studies are warning the upside may be limited. We still see the 1.28-1.30 region as key and while under here we still look for a broader medium-term range to develop further," says Wilkin.

Concerning the Euro-Pound rate, Wilkin says:

"The cross continues to push lower, but is approaching our target region of 0.8450-0.8400. Intra-day studies are warning the downside maybe limited too."