Forex4you - Analytics

    Forex4you

    538.00 7.00/10
    60% of positive reviews
    Real

    Thursday’s GDP release could impact on sterling

    U.K first quarter GDP data is released on Thursday (tomorrow) and pound traders need to be alert to potential volatility if figures do not match expectations.

    Preliminary estimates already showed the growth rate contracting sharply to 0.3% in Q1 from 0.6% in Q4.

    This has also contrasted with the exceptional recovery in the euro-zone during the first quarter, which saw growth actually outpace the rate in the U.K:

    GDPgrowthrate

    Yet despite the higher euro-area growth rate EUR/GBP has defiantly continued to weaken rather than rise.

    EURGBParticle

    One reason is the difference in monetary policy expectations between the two, with U.K expected to raise rates in 2016 and euro-zone currently talking about front-loading the pace of asset purchases in its new QE programme.

    The risk of a default from Greece is another factor weighing on the euro and not the pound.

    Annualized GDP in the U.K is still considerably higher at 2.4% than the euro-area’s 1.0% – so Europe still has some way to catch up, but a poor print tomorrow may start to change medium term expectations about whether the difference will persist.

    Inflation/Deflation

    Sterling’s continued strength in the face of deflationary data is another reason to perhaps question how far the down-trend in EUR/GBP can extend.

    In April inflation fell by -0.1% for the first time in over 55 years, and yet despite this the currency remained relatively resilient, as it was seen as temporary and was dismissed by many analysts as resulting from the fall in global energy and food prices.

    In the euro area meanwhile inflation came out flat at 0.0% – not that different warranted, but still interestingly it created another cross-over in the comparison of the two rates:

    Inflationrate

    Sterling seems to be defying worsening economic data – but how long can it keep strengthening in the face of empirical evidence?

    Tomorrow’s first quarter GDP (second estimate) is a chance to clarify whether the poor results are really just a blip or part of a deeper problem, and sterling bulls should take note of the possibility of a sharp re-pricing following any surprises in the results – particularly to the downside.

    U.K first quarter GDP data is released on Thursday (tomorrow) and pound traders need to be alert to potential volatility if figures do not match expectations.

    Preliminary estimates already showed the growth rate contracting sharply to 0.3% in Q1 from 0.6% in Q4.

    This has also contrasted with the exceptional recovery in the euro-zone during the first quarter, which saw growth actually outpace the rate in the U.K:

    GDPgrowthrate

    Yet despite the higher euro-area growth rate EUR/GBP has defiantly continued to weaken rather than rise.

    EURGBParticle

    One reason is the difference in monetary policy expectations between the two, with U.K expected to raise rates in 2016 and euro-zone currently talking about front-loading the pace of asset purchases in its new QE programme.

    The risk of a default from Greece is another factor weighing on the euro and not the pound.

    Annualized GDP in the U.K is still considerably higher at 2.4% than the euro-area’s 1.0% – so Europe still has some way to catch up, but a poor print tomorrow may start to change medium term expectations about whether the difference will persist.

    Inflation/Deflation

    Sterling’s continued strength in the face of deflationary data is another reason to perhaps question how far the down-trend in EUR/GBP can extend.

    In April inflation fell by -0.1% for the first time in over 55 years, and yet despite this the currency remained relatively resilient, as it was seen as temporary and was dismissed by many analysts as resulting from the fall in global energy and food prices.

    In the euro area meanwhile inflation came out flat at 0.0% – not that different warranted, but still interestingly it created another cross-over in the comparison of the two rates:

    Inflationrate

    Sterling seems to be defying worsening economic data – but how long can it keep strengthening in the face of empirical evidence?

    Tomorrow’s first quarter GDP (second estimate) is a chance to clarify whether the poor results are really just a blip or part of a deeper problem, and sterling bulls should take note of the possibility of a sharp re-pricing following any surprises in the results – particularly to the downside.


    To leave a comment you must or Join us


    By visiting our website and services, you agree to the conditions of use of cookies. Learn more
    I agree