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Sterling Stalls as UK Confirmed to be in a Technical Recession

Sterling Stalls as UK Confirmed to be in a Technical Recession

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK GDP falls 0.3% in Q1 -> UK enters a technical recession -> Cable drops towards 1.5530

United Kingdom gross domestic product fell by 0.3% in the first quarter of 2012, as was initially estimated following the end of the quarter. The quarter’s GDP was 0.2% lower than Q1 2011, as opposed to the initial estimation of -0.1%, according to the UK Office for National Statistics.

Total business investment during the first quarter was only 1.9% higher, as opposed to the initially measured 3.6% growth. The quarter’s business investment was 14.8% higher than Q1 2011. Disposable income also fell 0.9% during the quarter and 0.1% from a year earlier.

The UK economy is experiencing a technical recession, as defined by two straight quarters of lower GDP. The economy also shrank 0.3% in Q4 of 2011. In the BoE minutes from the last meeting, the economic slowdown was heavily attributed to the European debt crisis.

Also contributing to the worsening economic picture in the UK, nationwide housing prices were reported earlier this morning to have unexpectedly fell 0.6% during June, as opposed to an expected 0.1% rise. There is a wide belief that the BoE will add to its stimulus plan in the next meeting, based on comments by Governor Mervyn King and the minutes from the meeting earlier this month.

A risk-off sentiment was triggered earlier today by higher German unemployment, Cable dropped from 1.5600 towards 1.55300.

Sterling_Stalls_as_UK_Confirmed_to_be_in_a_Technical_Recession_body_gbp.png, Sterling Stalls as UK Confirmed to be in a Technical Recession

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