European session review: the pound rose slightly on the back of GDP data

The pound strengthened against the US dollar after data showed that in the 1st quarter the UK economy grew more than expected, exiting a mild recession. Experts said today's data could give the Bank of England some breathing space, but the focus will remain on statistics on consumer inflation and wage growth.

The Office for National Statistics (ONS) said that UK GDP grew by 0.6% after falling by 0.3% in the fourth quarter of 2023. This was the strongest growth since the 4th quarter of 2021. Economists had expected the economy to expand by 0.4%. In annual terms, GDP grew by 0.2%, offsetting a decline in the 4th quarter (-0.2%). Consensus estimates suggested that GDP would remain unchanged. Meanwhile, monthly estimates show that GDP increased by 0.4% in March, accelerating compared to February (+0.2%, revised from +0.1%). Economists had expected GDP to grow by 0.1%.

Yesterday, the Bank of England left the interest rate at 5.25%, but signaled the possibility of easing monetary policy in the summer. Currently, money markets are fully anticipating a 0.25% reduction in August and 0.5% overall this year. Meanwhile, some economists expect a rate cut as early as the next meeting in June, as well as three or more cuts in 2024.

The yen fell by 0.20% against the US dollar, to 155.76, approaching yesterday's session high (155.96). Since the beginning of the week, the yen has fallen by 1.8%, as traders continued to test the resolve of Japanese authorities to support the currency. Meanwhile, Japanese Finance Minister Shunichi Suzuki reiterated today that the government can take action if necessary.