The British economy continued to decline during the month of September, which was shown by the GDP data that indicated a slowdown in September, which negatively affected the performance of the pound sterling against the dollar.
The GDP index for the month of September in Britain showed a growth of 1.1%, after the previous reading witnessed a growth of 2.2%, which was revised from 2.1%, while expectations indicated a growth of 1.5%.
On the other hand, we find that the preliminary reading of the annual gross domestic product during the third quarter showed a contraction by 9.6%, compared with the same period last year after a contraction during the second quarter by 21.5%, which is the largest contraction recorded for an advanced economy.
In the period from July to September, the GDP recorded a record growth of 15.5% compared to the previous three months, but that failed to compensate for nearly 20% of its collapse in the second quarter, which included most of the period in which the country was in the grip of the first corona lockdown.
The BOE said last week that it expects the British economy to shrink by 11% during the entire year of 2020 before returning to growth by 7% in 2021. However, optimism in the markets after the emergence of a vaccine for the Corona virus increased hopes that recovery next year will be stronger than central bank’s forecasts.
The British economy was supported by more than £200 billion from emergency spending and tax cuts ordered by Finance Minister Rishi Sunak and the Bank of England’s bond-buying program that was expanded to nearly 90 billion pounds.
Despite this significant support, the British economy is suffering the largest downturn among major economies.
Weak growth data from the British economy pushed the British pound to decline during today's trading versus the dollar for a second day in a row, to hit its lowest level at 1.3160, after it opened trading today at 1.3207.
This British pound recorded its highest level in 10 weeks against the dollar yesterday at 1.3312, in light of the weakness of the US dollar against the major currencies since the advancement of the US Democratic Party candidate Joe Biden in the US presidential race.
The announcement of the successful trials for the Covid-19 vaccine for deterred investors from buying safe haven investments, including the dollar.