The UK economy grew by 0.5% in Q3 2016, better than 0.3% expected. This is the quarter immediately after Brexit. The outcome lowers the chances of a rate cut in next week’s BOE decision.
Also on a yearly basis, economic growth came out above projections: at 2.3% instead of 2.1%, which was also the rate in Q2.
GBP/USD, which was pressured ahead of the publication, reversed its course and is now on the rise, trading at 1.2260. The high so far has been 1.2270. Resistance awaits at 1.2320 and if cable indeed stages a recovery, the next hurdle is 1.2480. On the downside, 1.22 worked as a pivotal line.
Update: the gains do not hold, and the pair returns to pre-release levels around 1.2230.
Here is our preview: trading the UK GDP with GBP/USD
The Bank of England meets next week to make its rate decision, this time accompanied by the Quarterly Inflation Report. The meeting was expected to see the second rate cut following the EU Referendum. When Carney and co. offered a comprehensive stimulus package back in August, they hinted about a second move in November, perhaps a cut from 0.25% to 0.1%.
The BOE can claim that part of the softer slowdown is a result of its actions. The weaker exchange rate also supports exporters. However, it is becoming clearer that at least in the immediate aftermath, the impact of the vote is minuscule, to say the least. What about the long-term implications of the EU exit? That is still to be seen.
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