The UK economy grew by 0.8% in Q1 2014 according to the initial read. Year over year, this is +3.1%. Both figures are a bit below expectations.. Growth in the UK was expected to accelerate to 0.9% in the first quarter of 2014 after a rise of 0.7% in Q4 2013. Year over year, growth was expected to rise to 3.2% from 2.7%. These are elevated expectations and they weren’t met.
GBP/USD was trading around 1.6830 towards the publication, remaining close to the 4.5 year highs. The pair dropped below 1.68 and immediate came back up above the line, albeit lower than before the publication.
The index of services for the three months ending in February carried expectations for a rise of 0.9% and this is exactly what happened.
There was minor front running towards the release and a minor drop afterwards. Where is the volatility?
The UK has been enjoying strong growth in the past few quarters after avoiding a triple dip recession just one year ago. The unemployment rate has dropped to 6.9% in the most recent read. Interest rates are predicted to rise in the second quarter of 2015, but the current low levels of inflation, 1.6%, give the Bank of England an extra margin.
1.6840 caps the pair. Support awaits at the round number of 1.68. For more, see the GBPUSD forecast.
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