The forex value of the British sterling continued to gain strength against the euro on Wednesday (November 24). The rally of the sterling was largely propped up by the confirmed economic growth of 0.8% on the third quarter gross national product figures. On the other hand, the unrelenting public and market worries about the debt crisis plaguing the eurozone have also contributed in the strengthening of the sterling. This was through the weakening of the euro, lifting up the foreign exchange value of the British currency to €1.185.

Although the third-quarter GDP growth provided some optimistic prospects and remained relatively unchanged compared to last month’s figures, the Office for National Statistics has warned that the level of consumer confidence, as measured by their spending, is comparably lower. The Office for National Statistics has confirmed that the economic growth due to individual or household spending only accounts for a little portion of the GDP growth figures. Consumer spending declined from 0.7% to o.3%. Meanwhile, a larger portion of the GDP growth can be attributed to the improved performance of the export sector.

You do not need to learn forex trading to understand the correlation between the previous weakness of pound and the recovery of the British export sector. Although the pound is gaining strength, it has been generally weak for the past three years. This made the export goods of Britain more affordable and attractive to the overseas markets.

As the export trades went up at a faster rate compared to the imports, the trade deficit was significantly reduced from £10.9 billion to £9.7 billion in the third quarter. Lower trade deficit automatically translates to higher trade surplus, which is one of the main driving forces of domestic economic growth. The Bank of England will surely be delighted about the improvement in the export figures. The policymakers at the Bank of England have always seen lower trade deficit as a key for a sustainable economic recovery for the United Kingdom.

On the other hand, economic experts are still sceptical about the impact of the recent GDP growth figures because of the decline in the level of consumer confidence. The relatively low spending figures will serve as a serious resistance that could slowdown the economic recovery. The austerity measures of the government may also exacerbate the sluggish recovery.

The chief British economist working for IHS Global Insight – Howard Archer – has predicted that the GDP growth for this year’s last quarter will be around 0.5%. He emphasized that it is likely that there will be little boost due to consumer spending, especially on high-end goods. Hence, the overall gross national product growth for the present year would be 1.8% if the last-quarter becomes a reality.

Although the recent GDP growth rate is considered as a slowdown from the 1.2% growth rate in the second quarter, it is still comparably higher than what was previously expected.