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Pound Drops as GDP Shrinks

July 25, 2012 at 21:30 by Vladimir Vyun

Focus on 5-pound noteThe Great Britain pound dropped today after the government report showed that the UK economy contracted in the second quarter of this year more than was estimated by analysts.

Britain’s gross domestic product shrank 0.7 percent in the second quarter of 2012 from the previous quarter. The reading was below market expectations of a 0.2 percent drop. That was the third consecutive decline and the quarter was the worst since the first three months of 2009.

It is obvious that the United Kingdom suffers from an economic crisis and is not likely to emerge from it soon. Apparently, the austerity measures do not have the desired effect. It is hard for the pound to play the role of a haven from the European crisis when the British economy is not better than the European one.

GBP/USD traded at 1.5496 as of 21:30 GMT today, following the earlier rise from 1.5505 to 1.5551. GBP/JPY was down from 121.18 to 121.07. EUR/GBP advanced from 0.7777 to 0.7840.

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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