GBP/USD was confined to the 1.2120s range following the release of UK Gross Domestic Product (GDP) data at the start of today's European session.

Yesterday, the pound sterling rallied thanks to the depreciation of the US dollar and statements by officials from the British central bank (BoE) that tended to be hawkish. However, momentum is sluggish in trading this Friday, February 10. GBP/USD was confined to the 1.2120s range following the release of UK Gross Domestic Product (GDP) data at the start of the European session, while GBP/JPY even fell by one percent.

GBP/USD Daily

The UK GDP report shows growth of -0.5% month-over-month in December 2022. This figure indicates a further decline from the record -0.1% in the previous period, as well as being worse than the consensus estimate, which was pegged at -0.3%.

The UK economy as a whole did not grow at all, or 0% quarter-over-quarter, in the fourth quarter of 2022. Thus, the UK performed slightly better than the BoE's previous predictions and "only" narrowly missed a recession at the end of last year.

Some analysts think the UK may also avoid a recession this year, although the economic outlook remains challenging.

"Despite the cold snap in December due to bad weather, strikes, and sharper price hikes, the (economic) slowdown was not deep enough to push the UK into recession. There is still a chance the economy will experience negative growth for two straight quarters also this year, but the stretch of murky waters ahead will be shallower and less long than expected in the fall (last year), when the country was also suffering from financial instability," said Susannah Streeter, head of markets and money at Hargreaves Lansdown.

"Admittedly, the recent collapse in wholesale prices of energy commodities means that real household spending will increase in the second half of the year, driving UK GDP with it," said Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics.

Unfortunately, this assessment was not able to become a strong positive catalyst for the pound sterling. The UK is still the only developed country that is in danger of experiencing a recession this year. Moreover, if the BoE does raise interest rates again by 50 basis points in March, the economic pressure will be even heavier.