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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.

Check out our new Trading Guides: they’re free and have been updated for the fourth quarter of 2017

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%.

GBP Moves Higher After Better-Than-Expected UK GDP Data

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)

GBP Moves Higher After Better-Than-Expected UK GDP Data

Charts by IG

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.

The Traits of Successful Traders and how to find the Number One Mistake Traders Make are just two of the topics covered in ourFree Trading Guides.

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1