Pound rises after UK GDP revised upwards to -0.5%

The pound has risen against the euro after UK GDP growth was reported as -0.5% in Q4 2010, slightly ahead of previous estimates of -0.6%.

Meanwhile, the annual rate of growth was unrevised at 1.5% in the latest report by the ONS.

Following the announcement, the pound was trading slightly up at 88.23p against the euro. It had reached its weakest level in five months against the single currency before data was released, trading at 88.36p per euro. The FTSE has been trading sideways this morning, and is currently down slightly by 0.01% to 5,904.

Emma Wilson, currency broker at forex company, Currency Solutions, says while the latest GDP figures will improve confidence a little bit the UK economy is still in a difficult place.

"The fact remains that the dire fourth quarter GDP was not an easily re-adjusted anomaly as many had hoped, but a permanent statistical account of the lack of UK growth at the end of last year," she says.

"Judgement day for the UK economy, for Sterling and for the coalition Government itself is coming with the publication of the first quarter figures in a month's time. If there isn't a significant improvement, confidence in the economy and the pound could plummet."

Meanwhile, the ONS reported output in the service industries fell by 0.6% in Q4 2010, while household expenditure fell 0.3% but is now 0.2% higher than Q4 2009.

In real terms, the trade deficit increased to £11.5bn in Q4, while exports of goods and services rose 1.7%, with imports rising 3.2%.

The UK also recorded a £26.8bn difference between the value of imports and exports; the widest the trade gap has been since records began.

Meanwhile, employee compensation at current prices rose by 0.3% in Q4, resulting in a 2.1% increase since Q4 2009.