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Sterling (GBP) Down But Not Out After UK Q2 GDP Contracts

Sterling (GBP) Down But Not Out After UK Q2 GDP Contracts

Nick Cawley, Strategist

UK Q2 GDP and Sterling (GBP) Pairs - Prices, Charts and Analysis:

  • The UK economy contracts in the second quarter, missing expectations.
  • UK trade deficit narrows markedly.

Q3 2019 Currency Forecasts andTop Trading Opportunities

Keep up to date with all key economic data and event releases via the DailyFX Economic Calendar

The first look at UK second quarter GDP showed the economy contracting after a fairly robust start to the year. Q2GDP fell to -0.2%, missing expectations of 0.0% and a first quarter reading of 0.5%. On an annualized basis, GDP slipped to 1.2% from a prior 1.8%.

Sterling (GBP) Down But Not Out After UK Q2 GDP Contracts

Commenting on the figures, ONS head of GDP Rob Kent Smith commented, “GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter. Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU.The construction sector also weakened after a buoyant beginning to the year, while the often-dominant service sector delivered virtually no growth at all.”

It was not all bad news as the UK trade deficit narrowed, as imports fell following a sharp rise in Q1 ahead of the UK’s original departure from the EU, according to the ONS.

Sterling (GBP) Down But Not Out After UK Q2 GDP Contracts

After slipping lower on the release, Sterling picked up to show just a small loss on the day although GBP remains weak and may be vulnerable to further sell-offs. GBPUSD remains above last Thursday’s low print at 1.2079 – the lowest level since January 2017 – but remains at risk of further sell-offs, especially if the US dollar picks up.

GBPUSD Price Chart (January – August 9, 2019)

Sterling (GBP) Down But Not Out After UK Q2 GDP Contracts

Retail traders are 77.7% net-long GBPUSD according to the latest IG Client Sentiment Data, a bearish contrarian indicator. However recent daily and weekly positional changes suggest that GBPUSD may soon reverse higher.

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on Sterling – bullish or bearish? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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