British Economy Contracts by 0.2% in Q4 2011
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British Economy Contracts by 0.2% in Q4 2011

The first release of British Gross Domestic Product for the last quarter of 2011 showed that the economy contracted by 0.2%. Early expectations stood on a contraction of 0.1%.

GBP/USD is rising. It fell before the publication. It seems that rumors were out there and now the pound is “rising on the fact”. Data leaks aren’t that uncommon in Britain.

This comes after seeing growth of 0.6% in the third quarter. It’s important to note that the British economy also contracted in the last quarter of 2010. It was then blamed on harsh weather seen during that time. The contraction seen now is related to the global slowdown, driven by the European debt crisis, among other factors.

Also released at the same time: the MPC Meeting Minutes for the  January  meeting. They showed that all the 9 members voted for no change in policy.

The Bank of England is widely expected to expand the Asset Purchase Facility (QE program) from its current capacity of 275 billion pounds in its February meeting. Higher unemployment and lower inflation already support it.

This report about contraction raises the chances of more QE – more pound printing.

GBP/USD took a big dive before the publication, and slid from the highs above 1.56 to 1.5540 just before the publication. Some rumors were probably running.

For more on the pound, see the GBP/USD forecast.

Also in Britain, the British Bankers’ Association reported a stronger than expected rise in mortgage approvals – a rise to 36.2K from 34.7K. Early expectations stood on 35.3K. The  Index of Services rose by 0.1%, better than no change that was expected.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.