British Recession still hurts the Pound
Posted on December 22, 2009 by Yohay
Filed Under Forex News | 4 Comments
Every GDP release in Britain reminds us that Britain is still in recession. Today’s final release of the Q3 GDP brought another disappointment, sending GBP/USD below 1.60. But according to unofficial numbers, there is a light at the end of the tunnel.
Contrary to other countries in the Western hemisphere, Britain is still in recession. The US, Canada and Europe are out of recession as of Q3. Japan already concluded the recessionary chapter in Q2, and Australia never dipped into recession, with only one quarter of contraction.
The British economy is still shrinking in Q3, and every release is painful: the first release was the biggest shock, when a 0.4% contraction was reported. The revised version was better, only 0.3%, but reminded us that Britain still suffers.
The release of the final version today held hopes of a narrow 0.1% contraction. The outcome was 0.2%. This may sound like a small difference, but it’s still worse than expected and it still hurt the Pound.
GBP/USD dipped under 1.60 for the first time October 14th. It’s erasing all the comeback. Currently a little bit above 1.60, the huge support line lies low enough: at 1.5720. But the release of the GDP today establishes the break of 1.6110, that wasn’t secured on Friday.
The forex market volume has already fallen towards the holidays, and a strong move downwards isn’t expected.
There is a light at the end of British tunnel: the NIESR institute showed that the British economy grew in the three months that ended in November. This includes October and November of Q4. So, growth in Q4 looks real.
If the upcoming release by NIESR for Q4 shows growth, the official number should confirm that and Britain will be out of recession, and the Pound can lift its head.
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