Sterling Latest: UK GDP data and Brexit
- UK Q4 GDP data missed expectations, renewing growth fears in the months ahead.
- Brexit implications now becoming more evident.
Sterling (GBP) Under Pressure at the Start of the Week.
The latest look at the state of the UK economy shows growth slowing sharply on a month-on-month basis and turning negative, missing market expectations. The monthly figure fell to -0.4% from a prior +0.25 and missed expectations of 0.0%, while quarter-on-quarter growth fell to 0.2% from 0.6% in Q3.
According to the Office for National Statistics, “GDP slowed in the last three months of the year with the manufacturing of cars and steel products seeing steep falls and construction also declining. However, services continued to grow with the health sector, management consultants and IT all doing well. Declines were seen across the economy in December, but single month data can be volatile meaning quarterly figures often give a better indication of the health of the economy.”
The lack of any progress in Brexit negotiations, with talk now that they might go all the way down to the wire, is becoming even more apparent in UK hard data. In addition last week BoE governor Marke Carney downgraded 2019 UK GDP to 1.2% from 1.7%, citing ongoing Brexit concerns.
GBPUSD is now trading either side of 1.2900 and may well test 23.6% Fibonacci retracement at 1.2894 before attempting to break the recent three-week low at 1.2852.
GBPUSD Daily Price Chart (March 2018– February 11, 2019)
IG Retail Sentiment data shows clients are 61.2% net-long GBPUSD, a bearish contrarian indicator. 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.
--- Written by Nick Cawley, Analyst
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