Pound lifts as Britain is set to avoid recession

THE pound climbed to a six-week high against the dollar as solid economic figures suggested Britain will avoid a recession.

Sterling rose by as much as 0.9pc to $1.2382 after the Office for National Statistics said the economy grew by 0.3pc in July.

It sparked hopes that the worst is over following an economic contraction of 0.2pc in the second quarter of 2019.

Traders were also encouraged by the passing of a law to prevent a No Deal Brexit, which has long been seen as a risk for sterling due to fears of economic turmoil.

Against the euro, the pound rose as much as 0.8pc to €1.123.

Fiona Cincotta, of trading firm Cityindex, said: ‘As the chances of the UK entering recession receded the pound ticked higher.

‘The UK economy is not out of the woods by any means. However, given the negativity that was surrounding Brexit and the economy, even the slightest bit of good news is being well received.’

Sir Charlie Bean, an economist at the Office for Budget Responsibility and former deputy governor at the Bank of England, told MPs on the Treasury Select Committee that a steady economic recovery looks likely.

He said: ‘It’s highly unlikely that the third quarter will show another contraction.’

Instead growth is likely to be 0.3pc or 0.4pc, Bean said.

Suren Thiru, of the British Chambers of Commerce, said: ‘While the near-term outlook remains challenging, the economy should avoid entering a recession this quarter.’

She said this is partly due to stockpiling by firms seeking to avoid disruption ahead of a possible Brexit on October 31.

Paul Dales, chief UK economist at Capital Economics, said: ‘Overall, the economy is still fairly weak but it’s not in recession.

‘Political chaos, yes. Economic chaos, no.’