UK GDP beats estimates and previous forecasts

Market Analysis /
26 Jan 2018

The UK GDP reading has come out better than expected with growth figures for the fourth quarter coming in slightly above expectations at 0.5% while the yearly number showed growth of 1.5% for 2017. The monthly print of 0.5% is slightly above the forecast previously of 0.3%. On the back of the numbers, we have seen a strong move in Sterling with GBPUSD jumping to retest try and retest 1.4300.

 The strong reading will be seen as positive news for Britain as it still tries to fight off negativity created by the Brexit negotiations. Although we still have no idea what post-Brexit Britain will look like, the numbers will give Theresa May a little more ammunition, and give others the feeling that she is not just steering a sinking ship into the abyss. The services sector was a big boost for the economy in the fourth quarter, and the stronger performance here will lead many to believe we could still outperform growth expectations for 2018.

 The pound has had a mixed week, with some strong gains initially helped by the US dollar downside. However , yesterday saw comments from Donald Trump contradict those of Treasury secretary Mnuchin earlier in the week. This caused a huge rally on the dollar that left GBPUSD floundering below 1.4100 at its lows yesterday. Th strong GDP reading here has led to a further recovery of that move, but will also show that as well as progress being made on Brexit, matters closer to home are also showing signs of improvement. The better than expected GDP reading follows on from strong unemployment, and more importantly wage numbers from earlier in the week.

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