British Pound Seesaws on a Solid GDP

British Pound Seesaws on a Solid GDP
by, David Frank, Economist, Bullish University

Points to consider in this Forex article:

• The third quarter gross domestic product (3Q GDP) was released this morning. Came in better-than-expected at 2.3 percent economic growth.
• Service sector growth expanded 0.8 percent and other sectors fell.
• The British Pound has been volatile since the release.

The British Pound has whipsawed around since the United Kingdom released their third quarter economic growth number earlier today. At first the Pound soared higher than quickly reversed and his since regained most of its losses. Please refer to the below 5 min MT 4 chart.

[Chart]

Britain’s third quarter gross domestic product expanded at a better-than-expected clip. On a quarter on quarter bases the GDP expanded 0.5 percent. This was better than the 0.2 percent expected and below last quarter’s growth of 0.7 percent. On an annual basis, their economy expanded by 2.3 percent for the same time period. This was above last quarter’s expansion and above the 2.1 percent expected print.

Looking into today’s GDP release, by the Office of National Statistics (ONS), the numbers show that the United Kingdom has not been adversely affected by the ongoing Brexit drama or its pending Article 50 referendum with the European Union. There was a strong performance in services, which grew 0.8 percent in Q3. This offset falls in other industrial groups. The three main industrial groups all fell in the third quarter of 2016.

The numbers are an indication that the British economy is holding up better than expected than many expected. Services are the clear gain and driving force with economic growth but there are some worrying signs with other sectors. In turn, the Sterling Dollar spiked higher against its major trading partners like the US Dollar, euro and yen thanks to a strong print. The Pound then fell back lower, sharply, as British Pound sellers who are selling GBP on a hard-Brexit entered into the market. There is also some concerns that the United Kingdom’s economy is relying too heavily on its service sector for support. The British Pound has since settled down, but there is a lot of volatility in this Forex market today.

In corporate news, embattled Deutsche Bank saw a volatile day on the exchanges despite releasing better than expected third quarter numbers which showed revenue increased at a nice clip. Shares spiked three percent higher at the release only to fall flat.

The British bank, Barclays, rose by three 2.3 percent in early trade after reporting a 35% increase in third quarter profits. This is a pre-tax number.

Looking at central bank news for the day, the Swedish National Bank kept its monetary policy as is with interest rates at -0.5 percent. This sent the Swedish Krona lower against the euro. This Forex market fell from 9.7170 to 9.68. The central bank also said it would not consider rising interest rates till early 2018.

In Norway, the Norges Bank kept rates at 0.5 percent. The Norwegian central bank said household debt has increased more-than-expected. This would keep the central bank on the sidelines for the near future.

 

from Bullish University http://ift.tt/2eyCCZe