GBP/USD Holds Above 1.6000 As UK 3Q GDP Remain Faithful To Estimates
- UK GDP (QoQ) (3Q A): 0.7% Actual Vs 0.7% Estimated; 0.9% Prior.
- UK GDP (YoY) (3Q A): 3.0% Actual Vs 3.0% Estimated; 3.2% Prior.
- GBP/USD Has A Relatively Limited Reaction As UK GDP Meets Estimates.
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The actual UK Gross Domestic Product for the third-quarter expanded at a slower rate at 0.7 percent quarter-on-quarter versus the previous quarter expansion of 0.9 percent. Meanwhile, year-on-year 3Q GDP report came in at 3.0 percent, which was slower than the prior reading of 3.2 percent. Both matched market expectations. The slowdown may have been due to manufacturing sector that grew at 0.4 percent, which was the weakest growth since 1Q of 2013. Such an outcome has led to a relatively limited reaction from GBP/USD as it continued to trade above 1.6000 level. In the bond market UK 10-year Gilt gained as it shed 3 basis-points lower at 2.21 percent after the UK GDP report crossed the wires.
Ahead of the GDP report, the British Pound stalled against the US Dollar as it held three-day decline helped by the release of the Bank of England Minutes and September’s UK Retail Sales figures. The Bank of England Minutes showed MPC members to have voted 7-2 for a hold interest rate decision, while raising concerns on the outlook of the global economy to have been a catalyst for their majority hold decision. They alluded to a rate hike to potentially act as a hindrance for the UK economy at this current time, which may suggest a delay in BoE’s anticipated hiking cycle. Moreover, UK Retail Sales came short of market expectations, which boded-ill for the British Pound as it added to the belief of low rates for longer. Daily FX Currency Strategist Ilya Spivak mentioned UK data to have aggressively deteriorated relative to consensus forecasts since mid-September, opening the door for a downside surprise.
Moving onto technical analysis, Ilya Spivak mentions near-term support to rest at 1.5991 (14.6 percent Fibonacci Expansion) and resistance at 1.6184 (23.6 percent Fibonacci Retracement). He holds neither long nor short position, but waits for a daily close above 1.6184 to make for a trade-able setup. Meanwhile, according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the GBP/USD stands at 1.17 as 54 percent of FXCM retail traders are long.
GBP/USD 5 Minute Chart
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Edward Hyon, DailyFX Research Team
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