The pound is outperforming, depreciating by less today than other G10 currencies helped in part by the data released this morning highlighting the strong momentum for the economy heading into Q2. The data is consistent with a positive outlook for the pound, economists at MUFG Bank report.
March UK GDP leaves economy 4.7% below pre-covid peak
“The Q1 GDP contraction of -1.5% was marginally less than the -1.6% consensus helped by a stronger March GDP reading. The economy expanded by 2.1% in March alone confirming the strength of the economy even before the first easing of the lockdown took place on 12th April. High frequency mobility data points to a notable pick-up in activity in April relative to March pointing to another strong bounce.”
“This data today certainly argues that the rebound coming could well be stronger than the BoE expects.”
“GBP has underperformed in Q2 to-date, being the 2nd worst performing G10 currency. We see scope for catch-up with the markets concluding the BoE outlook is too pessimistic leading to sooner taper speculation and the prospect of short-term rates drifting further higher, helping support GBP.”