The UK economy contracted more than expected in the fourth quarter as the euphoria following this year’s Olympics subsided, leaving the question – is the UK economy in a triple dip recession? Although the quarterly figure doesn’t outright confirm the notion, the sentiment is strong when taking a look at the fundamental drivers of the lower figure.
GDP Downright Depressing
According to the Office for National Statistics, growth for the UK economy in the 3-month period ending December fell by 0.3%. This compares with the 0.9% pace seen in the third quarter and lower than the 0.1% contraction estimated by market analysts. Even more depressing is the fact that the quarterly decline scraps any hope of the British economy to eke out a rate of expansion in 2012. The recent release now pits the annualized figure at unchanged – compared to estimates of at least a 0.2% expansion.
A slower pace of activity in manufacturing output alluded to the overall bearish GDP figure, as the sector has seen contraction in the 1.5% camp, with industrial output plunging 1.8%, according to ONS data. Government spending narrowed by 0.7% - a product of the UK PM Cameron’s deficit reduction plans.
All in all, with no silver lining available, today’s GDP figure remains widely bearish for the GBPUSD and the UK economy. This will now place more emphasis on future policy considerations by the Cameron administration, and more importantly the Bank of England. Although central bankers continue to focus on the Funding for Lending measure, it remains to be determined if it will pump enough support into the economy.
Looking Ahead
With that said, next months Bank of England meeting will surely gain more attention than before. Although nothing much is expected in the way of the interest rate, traders will be eyeing any shift in sentiment regarding the asset purchase.
According to the most recent minutes release of their January meeting, the MPC remains steadfast in its commitment to the current 375 billion pound asset purchase facility. However, the minutes reflected a bit of concern when it came to the overall economic situation – leaving open the possibility of further extensions in the near term.
Technical Levels To Watch
Although the GBPUSD is rebounding on the session, traders remain fixated on resistance at 1.5843. The barrier remains key to any further upside in the major pair – towards 1.5940. However, a failure to climb above the figure would propagate a decline to 1.5700 support.
GDP Downright Depressing
According to the Office for National Statistics, growth for the UK economy in the 3-month period ending December fell by 0.3%. This compares with the 0.9% pace seen in the third quarter and lower than the 0.1% contraction estimated by market analysts. Even more depressing is the fact that the quarterly decline scraps any hope of the British economy to eke out a rate of expansion in 2012. The recent release now pits the annualized figure at unchanged – compared to estimates of at least a 0.2% expansion.
A slower pace of activity in manufacturing output alluded to the overall bearish GDP figure, as the sector has seen contraction in the 1.5% camp, with industrial output plunging 1.8%, according to ONS data. Government spending narrowed by 0.7% - a product of the UK PM Cameron’s deficit reduction plans.
All in all, with no silver lining available, today’s GDP figure remains widely bearish for the GBPUSD and the UK economy. This will now place more emphasis on future policy considerations by the Cameron administration, and more importantly the Bank of England. Although central bankers continue to focus on the Funding for Lending measure, it remains to be determined if it will pump enough support into the economy.
Looking Ahead
With that said, next months Bank of England meeting will surely gain more attention than before. Although nothing much is expected in the way of the interest rate, traders will be eyeing any shift in sentiment regarding the asset purchase.
According to the most recent minutes release of their January meeting, the MPC remains steadfast in its commitment to the current 375 billion pound asset purchase facility. However, the minutes reflected a bit of concern when it came to the overall economic situation – leaving open the possibility of further extensions in the near term.
Technical Levels To Watch
Although the GBPUSD is rebounding on the session, traders remain fixated on resistance at 1.5843. The barrier remains key to any further upside in the major pair – towards 1.5940. However, a failure to climb above the figure would propagate a decline to 1.5700 support.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.