Data has revealed that the UK economy contracted by -0.4 per cent in April, marking the second consecutive monthly contraction and the largest monthly slump since December. Following the release Sterling slumped further against the US dollar. Commenting on this morning’s GDP figures, Head of GDP at the Office for National Statistics (ONS), Rob Kent-Smith said: “GDP growth showed some weakening across the latest three months, with the economy shrinking in the month of April mainly due to a dramatic fall in car production, with uncertainty ahead of the UK’s original EU departure date leading to planned shutdowns.
“There was also widespread weakness across manufacturing in April, as the boost from the early completion of orders ahead of the UK’s original EU departure date has faded.”
Meanwhile, the US and Mexico were able to reach an agreement over illegal immigration to ward off US President Donald Trump’s threatened tariffs that were scheduled to begin today.
The US president had threatened to impose 5 per cent tariffs on all Mexican goods, which would gradually rise to 25 per cent if the country did not agree to stem the flow of illegal migrants.
On Friday Mr Trump tweeted that a deal had been reached and the tariffs were now “indefinitely suspended”.
Following this announcement risk-appetite amongst traders increased, however the safe-haven US dollar continued to rise against Sterling as disappointing Chinese import figures rocked trade sensitive currencies.
Looking ahead to the start of Tuesday, the pound may slip following the release of the UK’s ILO unemployment rate.
If the number of people in employment in the UK rises higher than forecast in April, sentiment in Sterling could slide.
Meanwhile, the US dollar could rise following the release of the US Producer Price Index (PPI).
If the PPI figure rises higher than expected in May it could buoy the greenback.