GBP Rally as Weak GDP Pushes FTSE Down and Gilts Up

UK GDP (Q3 9:30GMT; 4:30EST)

Actual:                   2.7%      

Expected:             2.8%      

Previous:              2.8%

How Did the Markets React? 

Monstrous stop driven rally in the pound and lower than expected GDP readings pushed UK sticks lower but binds higher on the assumption that a highly appreciating currency would further slowdown the economic growth in UK. Equities slipped as fears of higher exchange rates led traders to conclude that UK corporations will face greater competitive threats and lower profit margins in the near future, while UK bind traders bid up 10 year Gilts speculating that the BoE will be forced to halt any consideration of additional rate hikes 

UK 10-Year Government Bonds

Yields on the benchmark 10-year Gilts declined markedly as  bond traders anticipated further slowdown in the economy  given the lackluster GDP readings which printed at 2.7% versus 2.8% expected and the massive rally in the British pound  which raised concerns about UK’s competitive  standing in the global markets. For the day yields on the 10 year bonds dropped by 5 basis points to 4.52%

UK 10-Year Government Bond Yields (Intraday)