UK GDP less than expected, Pound edges lower

Kenny Fisher MarketPulse

The British pound has edged lower on Thursday. In the European session, GBP/USD is currently trading at 1.2205, down 0.22%.

UK GDP posts weak gain of 0.1%

The UK economy climbed out of negative growth for the first time in three months but not by much. After GDP contracted by 0.1% in September and October, November saw a small gain of 0.1%, missing the market estimate of 0.2%. In the three months to November, GDP showed no growth.

The small uptick in growth in November was welcome news for the government but the economic outlook is not very bright. The recent “tax and spend” budget will see tax increases take effect in April, including a rise in employer National Insurance contributions. This will hurt the business sector and many firms will cut back on spending and investment, which in turn will dampen economic growth. Inflation remains high and combined with low growth, stagflation is a real danger.

Another headache for the government is Donald Trump, who has promised to slap tariffs on US trading partners. The UK is heavily reliant on its export sector and a trade war with the US would be devastating for the fragile UK economy. As well, Trump’s protectionist trade polices could lead to higher inflation which could derail much of the progress made to contain inflation. This week’s soft UK inflation and GDP reports have raised expectations that the Bank of England will lower interest rates at the next meeting on Feb. 6.

In the US, December’s inflation release presented a mixed picture, as headline CPI rose for a third straight month, while core CPI eased slightly. Expectations for a rate cut rose in the aftermath of the inflation report, sending the US dollar lower against many of the majors.

GBP/USD technical

GBP/USD tested resistance at 1.2242 earlier. Above, there is resistance at 1.2310.
1.2176 and 1.2108 are the next support levels.

Author

Kenny Fisher

MarketPulse

A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities.

EUR/USD weakens below 1.1650 as strong US data boosts Fed hold outlook

EUR/USD extends its losses for the third consecutive session, trading around 1.1640 during the Asian hours on Thursday. The pair loses ground as the US Dollar advances as a stronger-than-expected United States Producer Price Index and Retail Sales, along with last week’s easing Unemployment Rate, reinforced the case for the US Federal Reserve to keep interest rates on hold for the coming months.

GBP/USD holds above 1.3400 after UK GDP data

GBP/USD holds above 1.3400 in European trading, fading a spike to near 1.3450. The pair jumped on the upbeat UK growth and industrial data but failed to hold the uptick amid a broadly firmer US Dollar. The focus now turns to the mid-tier US data releases for further directives.

Gold remains near $4,600 due to Fed rate pause bets, easing tensions

Gold loses ground after hitting a fresh record high of $4,643 in the previous session, trading around $4,600. The non-interest-bearing Gold lost ground as a stronger-than-expected United States Producer Price Index and Retail Sales, along with last week’s easing Unemployment Rate, reinforced the case for the US Federal Reserve to keep interest rates on hold for the coming months.