Britain Hardly Grows – Support Line at Risk

British GDP rose by 0.2% in the first quarter of 2010, half the early expectations. GBP/USD reacts with a drop around the support line.

Economists expected a rise of 0.4% in Britain’s GDP, exactly as in Q4 of 2009. This is the first release of GDP for this period, and it may be revised. In the previous quarter, a growth rate of 0.1% was initially reported, and it finally climbed to 0.4%. This was partially done on the back of a downwards revision of data for Q3. Will they do this trick once again?

This was a very busy week in Britain.  Inflation is picking up in Britain – consumer prices rose at an annual rate of 3.4%, higher than expected. While this isn’t too good for the economy, it puts the option of a British rate hike as a possible option. It isn’t a temporary rise in fuel prices but a more serious rise. This strengthened the Pound that pushed higher on this release.

Employment figures were superb – another big drop in the number of unemployed people and also a revision of last month’s figures (the best since 1997) are definitely a good sign for the economy. As the elections are drawing close, this figure isn’t necessarily good, as it complicates the political situation.

Retail sales didn’t follow the previous figures, and rose by only 0.4%, weaker than 0.7% that was predicted, although its important to note that last month’s figure was revised to the upside.

GBP/USD

After pushing higher, above 1.5350, the pair traded in a range from 1.5350, testing the support line and 1.5473. A downwards break of 1.5350 wasn’t confirmed. On the other hand, the 1.5520 line wasn’t approached. 1.5520 was last week’s high and also a support and resistance line in the past.

With the disappointing GDP, a drop towards 1.5120, which proved to be a strong support line, can happen at any time.

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