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Pound Drops as UK GDP Declines

January 25, 2012 at 13:00 by Vladimir Vyun

UK coins on banknotesThe Great Britain pound fell against the US dollar and pared its gains versus the Japanese yen after the UK Office for National Statistics reported that the nation’s GDP shrank in the last quarter, adding to signs than Britain is entering recession.

Britain’s gross domestic product contracted 0.2 percent in the fourth quarter of 2011, following the expansion by 0.6 percent in the preceding quarter. Other economic indicators were actually good, but the slowdown of the economy overshadowed the positive data. Mervyn King, Bank of England Governor, spoke yesterday about a possibility of additional stimulus:

And, with inflation falling back and wage growth subdued, there is scope for interest rates to remain low, and, if necessary, for further asset purchases, to prevent inflation falling below the 2% target.

GBP/USD fell from 1.5622 to 1.5558 as of 13:00 GMT today. GBP/JPY was at about 121.49 after opening at 121.35 and reaching 122.02 — the highest price since December 27.

If you have any questions, comments or opinions regarding the Great Britain Pound, feel free to post them using the commentary form below.

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