European session review: GBP mostly higher after better-than-expected UK Q4 GDP data

GBP strengthened against most of its major rivals in the European session on Friday as investors digested data that showed the UK's economy grew more than forecast in the fourth quarter of 2020.

The Office for National Statistics (ONS) reported its preliminary estimate showed that the UK's GDP expanded by 1.0 percent q/q in the fourth quarter of 2020, following a 16.1 percent q/q growth in the previous quarter. Economists had expected an increase of 0.5 percent q/q. Despite two consecutive quarters of growth, the UK's GDP was still 7.8 percent below its pre-pandemic level. In y/y terms, Britain's GDP declined by 7.8 percent y/y in the fourth quarter, following a revised 8.7 percent decrease in the third quarter. Economists had forecast an 8.1 percent contraction. Over the year 2020 as a whole, the British economy shrank by 9.9 percent, its largest annual drop on record.

The pound also continues to be supported by the relatively successful delivery of the UK's Covid-19 vaccine programme, as well as relief that a last-minute Brexit trade agreement was struck at the end of 2020.