Abshire-Smith - Analytics


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    UK Q1 GDP preliminary estimate misses expectations

    The Office of National Statistics (ONS) preliminary reading for UK Q1 GDP data disappoints markets and misses expectations; 0.3% compared to a median estimate of 0.5%. In the fourth quarter of 2014, GDP was estimated to have expanded at 0.6%.

    The UK economy is the fastest growing in the G-10, with improving employment and record low inflation. The economy is at a pivotal point, as we exit a multi-year recession, though the headline reading is the weakest QoQ growth since Q4 2012.

    Be mindful of revisions

    As reported by Bloomberg the average revision for the ONS preliminary GDP reading is /- 0.4%, which should dampen the market’s reaction.  The reason for the potentially high range of revision is that at the time of compilation, the ONS only has around 44% of the statistical readings which is why the figure susceptible to significant future revisions.  

    General election

    Voters head to the polls for the UK general election on 7 May, with a matter of days remaining; the polls show that the two majority parties will be unable to form a majority government. The latest YouGov / The Sun results 27th April - Con 35%, Lab 34%, LD 9%, UKIP 12%, GRN 5%; APP -12.

    The GDP reading from the ONS will be heavily politicised, as it is one of the final major pieces of economic data prior to the election. A strong figure could have been a decisive point for the Conservative party to push ahead, and gain swing voters as the incumbent party building a stronger economy.

    Analysts have highlighted the potential risks to Sterling as the election nears; with the outcome uncertain, traders are likely to sell GBP in the FX markets.

    GBPUSD: 1.5184
    EURGBP: 0.7167

    FTSE 100: 7,048

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