Sterling Talking Points
- UK 3Q GDP in line with expectations but Q2 data revised higher, boosting Sterling.
- IMF still downbeat on UK growth prospects ahead due to Brexit worries.
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UK 3Q GDP showed a mixed picture with q/q growth of 0.4% in line with expectations, while the y/y rate of 1.7% beat expectations of 1.5%. The annual rate also saw Q2 growth upwardly revised to 1.9% from a prior 1.5%.
While some economists believe that Brexit has caused a loss of between 0.5% - 1% GDP growth in 2017, IMF chief Christine Lagarde believes that the UK economy will continue to suffer with Brexit capping 2018 UK growth at 1.5%.
"The shape of the new agreement with the EU will affect productivity performance through its implications for trade, investment and migration. The higher are any new barriers to the cross-border flow of services, goods and workers, the more negative the impact would be," Lagarde said.
GBPUSD jumped after the GDP release, although the move was muted due to pre-Christmas market lethargy.
GBPUSD Price Chart One Minute Timeframe (December 22, 2017)
GBPUSD Client Positioning Data Cast a Bearish Shadow
IG Client Sentiment data show 51.7% of traders are net-long GBPUSD with the ratio of traders long to short at 1.07 to 1. The number of traders net-long is 1.5% lower than yesterday and 7.3% higher from last week, while the number of traders net-short is 5.5% lower than yesterday and 16.0% lower from last week. We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD-bearish contrarian trading bias.
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
