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Pound Falls Despite UK Economy Meeting Expectations for 0.6% Growth

By Benjamin Spier
25 July 2013 09:30 GMT

THE TAKEAWAY: UK GDP rises 0.6% in Q2 -> GDP expansion may not have been enough to offset recent BoE dovish comments -> Pound falls

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UK gross domestic product grew at the fastest pace in three quarters and met analysts’ mean expectation, but that was not enough to stop a 70 pip selloff in Cable trading.

UK GDP rose 0.6% in the second quarter, as was expected and better than the 0.3% growth reported in the first quarter. GDP was 1.4% higher than Q2 2012, according to the UK Office for National Statistics. UK manufacturing rose 0.4% in Q2, while services rose 0.6%, led by retailing, hotels, and business services.

Despite the recent improvements in UK economic performance, the BoE said in its July meeting that the economy is still weak despite the recovery and slack is expected for some time. Therefore, improved UK economic performance could dissuade the BoE from adding to stimulus in the future.

The Pound sold off as traders may have been looking for a better than expected GDP result, and the Euro also continued its decline, which started after a temporary rise on better than expected IFO German business climate. GBP/USD is currently trading around 1.5300, and a former resistance line around 1.5280 may provide support.

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GBPUSDDaily: July 25, 2013

Pound_Falls_Despite_UK_Economy_Meeting_Expectations_for_0.6_Growth_body_gbpusd.png, Pound Falls Despite UK Economy Meeting Expectations for 0.6% Growth

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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25 July 2013 09:30 GMT