Sterling (GBP) Brushes Aside UK Data as Brexit Takes Center Stage
GBPUSD Price, UK GDP and Brexit
- UK data beats expectations but manufacturing and industrial production still weak.
- GDP m/m surprises to the upside.
A better-than-expected set of official UK data prints helped underpin Sterling, but markets remain fixated on Attorney General Geoffrey Cox’s interpretation of UK PM Theresa May’s ‘legally binding’ changes agreed with the EU late Monday.
The UK economy grew 0.5% on a month-on-month basis in January, beating expectations of 0.2% growth and sharply higher than December’s negative 0.4% print. On a rolling three-month basis, the economy grew by 0.2%, the same rate seen in Q4 2018.
According to Rob Kent-Smith ONS head of GDP, “Across the latest three months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth. These were offset by strong performances in wholesale, IT and health services. This sluggish growth came despite the economy bouncing back from a weak December.”
UK production picked up from a dire set of figures in December but remained in negative territory on an annualised basis.
Sterling remains on edge, waiting for Attorney General Geoffrey Cox’s verdict on the UK’s ‘legally binding’ changes to the backstop, agreed between UK PM Theresa May and Jean-Clause Juncker late Monday. Sterling jumped sharply after these changes were announced yesterday but the British Pound is fading as markets wait for the legal judgement.
GBPUSD implied volatility also surged to its highest level in nearly three-years, implying a move of 163 pips in the session.
GBPUSD Daily Price Chart (June 2018 – March 12, 2019)
Retail traders are 60.4% net-long GBPUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. Recent changes in daily and weekly sentiment however currently suggest a mixed trading bias for GBPUSD.
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