GBP Under Pressure As UK Growth Slows Further
- Q1 GDP disappoints at 0.2% compared to 0.7% Q4 2016 growth.
- GBP struggles as Brexit fears start to weigh on the UK economy.
- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.
The second estimate of UK Q1 GDP missed analysts’ expectations and came in at a lowly 0.2% compared to the preliminary estimate of 0.3% and Q4 2016’s 0.7%. On an annualized basis UK GDP edged lower to 2.0% from 2.1%.
Today’s release is based on around 80% of actual data – compared to around 44% in the first release – and contains more complete output data as well as early information on GDP measured by the expenditure and income approaches.
According to the Office for National Statistics, “consumer facing industries such as retail and accommodation fell and household spending slowed. This was partly due to rising prices. Construction and manufacturing also showed little growth, while business services & finance continued to grow strongly.”
The British Pound slipped lower on the release and continues to find resistance around the 1.30480 recent high made on May 18.
Chart: GBPUSD Daily Timeframe (February 2 – May 25, 2017)
The latest IG Client Sentiment Data, show retail investors remain short GBPUSD.
Retail trader data shows 39.8% of traders are net-long with the ratio of traders short to long at 1.51 to 1. In fact, traders have remained net-short since Apr 12 when GBPUSD traded near 1.23717; price has moved 5.0% higher since then. The number of traders net-long is 2.9% lower than yesterday and 6.4% lower from last week, while the number of traders net-short is 1.0% higher than yesterday and 1.4% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD-bullish contrarian trading bias.
--- Written by Nick Cawley, Analyst
To contact Nick, email him at email@example.com
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