Sterling Talking Points
- UK Q4 growth picks up to 0.5% while the yearly figure prints at 1.5%, both above expectations.
- GBP/USD nudges up, keeping most of its recent gains although Davos speeches may weigh.
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UK Economic Growth Data Beats on The Upside
The first look at UK Q4 GDP showed the economy grew at a q/q rate of 0.5%, beating expectations and a prior quarters 0.4%, while annual growth was released at 1.5%, beating expectations of 1.4%. While the headline numbers are mildly positive, against expectations at least, the ONS warned of slowing growth ahead. According to Darren Morgan, head of GDP,
“Despite a slight uptick in the latest quarter, the underlying picture is of slower and uneven growth across the economy.The boost to the economy at the end of the year came from a range of services including recruitment agencies, letting agents and office management. Other services – notably consumer facing sectors – showed much slower growth. Manufacturing also grew strongly but construction again fell.”
GBP/USD Remains Buoyant but Eyes Davos Speeches later in The Day.
GBP/USD ticked higher on the release, retaining most of this week’s gains. While Sterling as a currency is relatively strong, the US dollar remains weak after the greenback was talked down by US Treasury Secretary Steve Mnuchin recently. US President Donald Trump tried to talk the greenback up later in the day in Davos yesterday but it seems the market still is looking at the US dollar negatively.
Ahead, Donald Trump speaks in Davos at 13:00 GMT, The first iteration of US Q4 GDP is released at 13:30 GMT while BoE governor Mark Carney, the IMF’s Christine Lagarde and the BoJ’s Haruhiko Kuroda are involved in a panel discussion at 14:00 GMT.
GBPUSD Price Chart Daily Timeframe (August 2, 2017 – January 26, 2018)
GBPUSD Client Positioning Hints at Lower Prices
IG Client Sentiment data show 38.8% of traders are net-long with the ratio of traders short to long at 1.58 to 1. In fact, traders have remained net-short since Dec 28 when GBPUSD traded near 1.33553; price has moved 6.6% higher since then. The number of traders net-long is 0.2% higher than yesterday and 15.3% higher from last week, while the number of traders net-short is 8.8% lower than yesterday and 6.7% 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. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
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--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Follow Nick on Twitter @nickcawley1
