Initial thoughts on UK GDP

Initial thoughts on UK GDP

• 0.6% growth rate as expected.

• Strong pick up in services, smaller gains for construction, manufacturing and mining.

• Overall, there were gains across the board and this is a solid reading of Q2 GDP.

• There is little of surprise in the data, however all eyes are now on Q3, so the July PMI data will be key for the UK outlook when they are released in early August.

• It looks like the “strong” GDP report was priced into the GBP, which has sold off on the back of the data.

• One reason for the sell-off could be BOE event risk: BOE meeting on 1st August and Inflation Report on 7th August.

• The market is expecting Forward Guidance to be introduced at the BOE next month and it doesn’t quite understand how that will impact GBP.

• The BOE Is likely to try and keep a lid on Gilt yields, and after the GDP report Gilt yields have pulled back, which is also weighing on the pound.

• We expect GBPUSD to trade in a range between 1.5290 – the 50-day sma, and 1.5380 – the base of the daily cloud.

Source: Forex.com

25.07.2013