Tuesday 11 December 2018

Pound jumps against US dollar as UK growth revised higher

The final reading of first quarter GDP showed the UK economy grew 0.2%.

The pound made gains against the US dollar (PA)
The pound made gains against the US dollar (PA)

By Kalyeena Makortoff, Press Association Chief City Correspondent

The pound spiked against the US dollar as investors cheered an upward revision to UK growth in the first quarter.

Sterling was up nearly 1% against the greenback to trade at 1.320, having dropped to a seven-month low a day earlier as investors worried about Brexit negotiation delays.

A final reading from the Office for National Statistics (ONS) on Friday showed that gross domestic product (GDP) grew 0.2% between January and March, topping previous estimates of 0.1%.

That was thanks to an upward revision in construction output, which mainly reflected improvements to the way the sector’s work is measured by the statistics agency.

Craig Erlam, a senior market analyst at trading platform Oanda said the pound was “benefiting from a combination of improved risk appetite but also the small upward revision to first quarter GDP…. which triggered a decent rally in the currency.

“The upward revision goes some way to confirming the view of the Bank of England that the first quarter wasn’t as bad as it initially appeared and gives further reason to follow through on plans to raise rates even if that may come a few months after initially intended,” he explained.

Sterling failed to make similar gains on the euro, which was itself benefiting data showing a rise in eurozone inflation to 2% in June.

The pound was flat versus the euro at 1.131.

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The pound rose against the greenback after GDP was revised upwards (PA)

The FTSE 100 ended the day up 0.28% or 21.3 points at 7,636.93 points, while the French CAC 40 and German DAX closed higher by 0.9% and 1%, respectively.

Brent crude prices jumped 2% to 79.07 US dollars per barrel as investors prepared for a drop in Iranian oil exports as a result of renewed US sanctions on the country.

Diminished exports from the Middle Eastern country will likely counter jitters over an extended oil supply glut, which has dampened crude prices.

In UK stocks, BAE Systems continued to rise on news that the British defence giant won a £20 billion contract to build a new fleet of Australian warships under a 30-year contract.

BAE Systems shares were up 14.8p at 646.8p.

Reach – formerly known as Trinity Mirror – rose 0.5p to 76.5p as the Daily Mail publisher said in a trading update for the 26 weeks to July 1 that total group revenue is expected to grow by 11%.

That rise reflects the acquisition of Northern & Shell, the company behind the Daily Express and Daily Star.

Serco slumped 1.95p to 98.95p after reporting that first half sales slumped 10.6% and warning that profits would be knocked when it adopts healthcare contracts from Carillion.

Serco’s underlying trading profit will be between £35 million and £40 million, the company said, compared with £34 million in the previous year.

Fastjet surged 5.38p to 8.265p after the struggling budget airline outlined plans to secure emergency funding of up to 12 million US dollars (£9.1 million), having earlier this week warned that it was at risk of going bust.

On Friday, FastJet said it will commence a share sale to raise 7 million US dollars (£5.4 million), while its biggest shareholder Solenta Aviation will pump 3 million US dollars (£2.3 million) into the group.

The biggest risers on the FTSE 100 were Micro Focus International up 49.5p at 1,323.5p, Anglo American up 58.8p at 1,694.8p, Rolls-Royce Holdings up 28.6p at 988.2p, and BAE Systems up 14.8p at 646.8p.

The biggest fallers on the FTSE 100 were Carnival down 68p at 4,347p, British American Tobacco down 47p at 3,830p, Whitbread down 36p at 3,959p, and Centrica down 1.4p to 157.65p.

Press Association

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