UK lost 9.9% of GDP in 2020 but ended the year positively

UK GDP data significantly exceeded expectations, but this is of little help to the pound after the release. At the end of the fourth quarter, GDP added 1%, twice as much as expected. The 9.9% fall in 2020 was the worst on record and did not allow the pound to strengthen amid a cautious trading pattern in global markets.

However, there are more positives in the report. The economy was adding in December despite record COVID-19 numbers. A separate report showed a 1.7% m/m growth in the service sector, the most vulnerable part of the economy during a lockdown. The massive vaccine roll-out in January and the continued vaccination rate offers hope for an accelerated economic recovery.

Due to Friday’s caution, the British pound reversed to a decline, falling below 1.38. That said, robust UK macro data will support the overall GBPUSD uptrend, with stronger buying likely to take place on a decline to 1.37 in the coming days.

The FxPro Analyst Team