The British pound strengthened on Friday after the UK’s economy was shown to have grown more than expected in January. The sterling was up 1.2% against the U.S. dollar at $1.2068; the biggest single-day jump since January 6. The euro was down 0.5% against the pound at 88.24 pence.
Data from the Office for National Statistics (ONS) indicated 0.3% month-on-month growth for the British economy, reversing a 0.5% decline in December. This further fanned fears of an incoming recession.
“At this stage, we are far from convinced that a technical recession in 2023 is the foregone conclusion that many in the market have made out,” Matthew Ryan, head of market strategy at Ebury stated. “We think that the resilience of the UK economy will provide decent support for the pound in the coming months.”
While the pound strengthened, the U.S. dollar retreated broadly after Friday’s U.S. jobs report showed a rise in unemployment and signs of cooling wage inflation. As a result, expectations that the Federal Reserve would raise interest rates sharply on March 22 declined.