European session review: GBP weakens against USD but strengthens against most other major rivals

GBP traded mixed against other major currencies in the European session on Tuesday as market participants remained preoccupied with the coronavirus situation and its impact on the economy. While the pound fell against USD, which is bought due to its safe-haven properties, it strengthened against the rest of major rivals.

Investors received several important macroeconomic reports. The Office for National Statistics (ONS) reported the UK's economy recorded a flat q/q growth in the fourth quarter of 2019, as initially estimated. According to the report, the UK's GDP remained unchanged q/q in the final quarter of 2019, unrevised from the preliminary estimate, after growing 0.5 percent q/q in the third quarter. That was in line with economists' forecast. On the production side, services output rose 0.2 percent q/q, while production output dropped 0.7 percent q/q, driven by declines in manufacturing and mining and quarrying. Meanwhile, construction output edged down 0.1 percent. On the expenditure side, the household consumption was unchanged in the three months to December and gross fixed capital formation declined 1.2 percent, led by a contraction in business investment. Meanwhile, government consumption grew 1.5 percent, driven by education and health, and net trade contributed positively to the GDP as exports rose more than imports, posting a trade surplus of 1.4 percent of nominal GDP. On a yearly basis, the UK's GDP grew 1.1 percent, also unrevised from the initial estimate. In 2019, the Uk's economy rose 1.4 percent after growing 1.3 percent in 2018.

Another report from the ONS revealed that the UK's current account deficit narrowed significantly in the fourth quarter, to GBP 5.6 billion, or 1.0 percent of GDP, down from an upwardly revised GBP 19.92 billion in the previous quarter. This was the lowest current account shortfall since the second quarter of 2011, mostly because of exports of non-monetary gold and other precious metals and a decrease in the UK's payments to foreign investors.

The survey carried out by the market research group GfK, revealed the UK consumer sentiment weakened moderately in early March ahead of the national lockdown announced to check the spread of coronavirus. The consumer confidence index fell two points to -9 in March. However, the reading was better than economists' forecast of -15.