Talking Points:
- 3Q year-on-year GDP expanded 2.3%, below expected
- Construction shrank 2.2%, Services rose to 0.7%
- Pound little changed versus the US Dollar
The British Pound was little changed versus the US Dollar after today’s preliminary 3Q gross domestic product (GDP) figures showed the UK’s economy grew less than forecasted. GDP expanded 0.5 percent in the three months to September, below the 0.6 percent expected and below the prior period, when it grew 0.7 percent. The year-on-year figure came at 2.3 percent, below the expected 2.4 percent, marking a new two-year low.
Details from the report painted a mixed picture for the UK’s economy. Construction shrank 2.2 percent, which is the biggest fall since 3Q 2013. Manufacturing was down 0.3 percent, but services output, which is the biggest share of the economy, rose to 0.7 percent from 0.6 percent in the second quarter, which is the biggest rise since 4Q 2014.
The Pound traded lower coming into the report from the high of the day at around 1.5358, suggesting traders were perhaps expecting a negative figure to hit the wires. DailyFX Currency Strategist Ilya Spivak remarked today that futures pricing suggests investors do not expect tightening by the BoE until the third quarter of 2016, which suggests the British Pound may be more sensitive to an upside GDP surprise versus a disappointing one. Taking this into consideration and the pickup in services output, the market seemed to be unfazed by the below expected report and the Pound was little changed versus the US Dollar.
DailyFX Currency Analyst David Song identified the next GBP/USD region of interest at the 1.5240 area.
