British Growth In Doubt – Pound Falls
Posted on January 26, 2010 by Yohay
Filed Under Forex News, Forex Opinions | 9 Comments
Britain’s initial GDP read for the fourth quarter is very weak, and the revised versions can easily erase it. The Pound reacted with a fall against the dollar and the Euro. Here’s a review of this important event and a look forward on the Pound.
Britain’s first release of GDP was very weak – only 0.1%. Early expectations were for a rise of 0.4%. The unofficial NIESR GDP estimate expected a weaker outcome, only 0.3%, but it was even worse.
The UK has been lagging behind other economies with an ongoing recession that went into Q3. The US and Canada exited recession in Q3, Germany and France in Q2. Australia never experienced recession. There were high hopes for a celebration, as Britain was expected to align with other countries.
An initial print of 0.1% can be easily erased in the second and final prints. A revision to 0% growth or yet another quarter of recession are possible as they are within the margin of error. Another quarter of recession is terrible for the Pound.
Hope can be found in the fact that the contraction in Q3 was upgraded from -0.4% to -0.2%, so maybe the final growth rate for Q4 will be better. But today’s release is definitely bad for the Pound.
GBP/USD fell instantly. A gap in can be found in the 30 minute charts, and it was followed by a further drop. GBP/USD dropped from 1.6210 to 1.6130 at the time of writing, and the drop continues.
An initial minor line of support appears at 1.6110 with a huge support line much lower, at 1.5720. There’s lots of room for more falls. For more technical lines, check out the British Pound forecast.
Mervyn King is currently speaking and he may speak about this fresh and disappointing release. Learning from last week, he wasn’t too positive, and he could hurt the Pound as well.
The Pound also lost ground against the Euro after a few weeks of EUR/GBP drops. EUR/GBP rose from 0.8680 to 0.8730, and also here the move continues. The downfall of the Pound can also be seen in GBP/JPY which fell to 144.30.
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