UK GDP rises only 0.5% – GBP/USD slides

The UK economy grew by 0.5% in Q4 2014 according to the first release. Year over year, the economy grew 2.7%, also 0.1% below predictions. The ONS says it is too early to say if there is a general economic slowdown in the UK. Indeed, year over year growth is actually up and the country’s growth is still positive and significantly stronger than in 2013.

The small miss weighs on GBP/USD, but  the move is not extreme: the pair is down  below 1.5060. Update: after the initial drop, cable is recovering back up to 1.5075.

Among the components, we have another steady rise of 0.8% in the services sector, exactly like in Q3. Manufacturing is basically grounding to a halt in the UK with only +0.1%. The energy sector is down 2.8%, but this is only a small part of the economy.

The BBA mortgage approvals also fell short of predictions with 35.7K instead of 36.6K  expected.

The United Kingdom was expected to report a growth rate of 0.6% quarter over quarter in Q4 2014 after a rise of 0.7% in Q3. In yearly terms, a  rate of 2.8% was predicted, actually higher than 2.6% seen in Q3. This is the preliminary reading for the quarter. Two revisions follow.

GBP/USD flirted with the 1.51 level, after recovering from  trading below 1.50 not too long ago.

The pound was hit hard last week by the unanimous decision of the MPC not to raise rates.  Cable was also carried lower following a USD rally. Sterling did however gain against the euro.

Here is the preview: trading the UK GDP with GBP/USD.