The pound has fallen against the dollar and euro today after news the UK's output in the second quarter showed a far less resilient economy than the market predicted.
The Office for National Statistics revealed the UK's gross domestic product (GDP) plunged 0.8% quarter on quarter in the three months to June, after a dramatic 2.4% fall in the first quarter, causing the pound to lose ground.
The pound fell to $1.6445 and €1.1576 compared with $1.6479 and €1.1639 at the close of trading on Thursday, as investors reacted to news of the fifth consecutive quarterly decline of UK GDP. The slump was steeper than the average 0.3% forecasted by City economists.
"These figures kill any hopes for recovery in the second half of the year and we are going to have to wait until 2010 before we see the numbers turn positive," says Alex Dunn, senior trader at Caxton FX.
As investors take a more cautious view on the pound, the firm expects the rate will tread water for some time.
"Nonetheless the worst of the recession has probably passed and investors are prepared to take on more risk and consequently we believe we will see more dollar weakness against the pound in the second half," he says.
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