Despite remaining fragile against the Euro and Dollar, the Pound received a boost – albeit minor – ahead of UK GDP data revealing the economy grew 0.3% in January.

This surpassed analysts’ forecast for growth of 0.1% and indicated a steep rebound from the -0.5% figure recorded in December.

The Pound to Euro rate was trading higher on the day at 1.1270 as it sought to hold steady following losses earlier in the week. Whereas the Pound to Dollar rate was up 0.20% at 1.1943, Pound Sterling Live reports.

According to the Office for National Statistics, January’s uplift indicated UK GDP was now flat in the three months to January this year.

Economic growth in January was fuelled by greater activity in the services sector, which increased by 0.5% in January after declining by 0.8% in December 2022.

The largest growth contributions at the start of the year stemmed from human health activities, education, entertainment, transport and recreation, all having rallied following declines in December last year. 

“The rebound in services activity is a technical rebound as the contraction in December 2022 in part reflected one-offs, from striking workers that impacted healthcare and transportation activities to reduced school attendance that weighed on education output, and (strangely) a fall in entertainment activities due to the postponement of Premier League fixtures for the FIFA World Cup,” said Daniel Vernazza, Chief International Economist at UniCredit Bank.

However, likely limiting the effect of any upside to Sterling signals other sectors of the economy continued to struggle. Indeed, production output edged down 0.3% in January, following 0.3% growth in December. Whereas the construction sector declined by 1.7% in January after remaining flat the month before. 

“The outlook remains weak, and we continue to expect a 0.3% quarter-on-quarter contraction in Q1 23 and a technical recession in the first half of the year, as the effects of tighter monetary policy work through the economy,” Vernazza added.