Travelex Market Analysis - Pace of growth exceeds all expectations

London - 26 October 2010

- 0.8% growth in Q3 will mute calls for quantitative easing
- Figures will refresh hopes that UK will avoid double dip

The UK economy grew 0.8% in the third quarter of 2010, at twice the expected 0.4% growth predicted by most economists. The news will mute concerns that the UK is about to embark on another programme of quantitative easing, although growth is still anticipated to slow with the increase in VAT and government spending cuts.

Sterling rose to 1.1383 against the euro and 0.9 per cent to $1.5870 against the US dollar after the news.

Mark Bolsom, Head of the UK Trading Desk at Travelex Global Business Payments comments, “The growth in the third quarter was surprisingly confident, exceeding all expectations and it will provide some welcome relief to the Coalition Government.

“These figures will refresh hopes that the UK will avoid the much maligned double dip, but we are going to have to wait until 2011 to see what impact spending cuts and tax hikes will have on the pace of economic growth. Having said this, we are going into the programme of cuts in a much better position than most people had hoped for, which is encouraging.”

Bolsom believes that the news will delay an extension of the Bank of England’s quantitative easing programme, “It is extremely unlikely that quantitative easing will happen this year. I think the earliest we can now expect it is the start of 2011.”

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