According to data published by the Office for National Statistics (ONS), UK GDP rose 0.3 per cent in July, up from 0.1 per cent growth in June and beating forecasts of a more modest 0.2 per cent expansion.
This lead to the UK economy growing 0.6 per cent in the three months to July, its fastest pace of expansion in almost a year, with analysts putting the growth surge down to boosts from the World Cup and the extended heatwave.
Rob Kent-Smith, head of GDP at the ONS said: “Growth in the economy picked up in the three months to July.
“Services grew particularly strongly, with retail sales performing well, boosted by warm weather and the World Cup.
“The construction sector also bounced back after a weak start to the year.”
The pound was also buoyed by the UK’s latest trade figures, with Britain’s trade deficit narrowing to just -£0.1bn in July, down from -£0.9bn the previous month and easily beating forecasts it would swell to -£2.1bn.
However slightly dampening sentiment this morning was the accompanying release of the UK’s industrial production reading, which saw factory output growth slow from 0.4 per cent to 0.1 per cent in July.
At the same time the euro is treading water at the start of this week’s session with markets awaiting the conclusion of the European Central Bank’s (ECB) latest policy meeting on Thursday.
No policy changes are expected from the bank this month, however there is still potential for the euro to advance should ECB President Mario Draghi remain broadly upbeat in his outlook.
Potentially dampening EUR sentiment however will be the accompanying release of the ECB’s latest GDP and inflation expectations, with analysts predicting that the ECB will likely revise down its 2018/19 growth forecasts.
Looking ahead, the release of the NIESR’s latest UK GDP estimate may strengthen the pound euro exchange rate later this afternoon if August’s growth rises in line with expectations.
The pound may then see further gains on Tuesday as the UK publishes its latest labour figures, with economists forecasting that wage growth will have risen in July, while unemployment is expected to have held at a 43-year low.
Meanwhile, ahead of Thursday’s ECB meeting, movement in the euro may be driven by the release of the Eurozone’s latest economic sentiment index, with the single currency potentially weakening if trade war fears lead to September’s survey remaining in negative territory.