Sterling Extends Loss After NIERS Says UK GDP Grew 0.1% In Feb Quarter

By Trang Nguyen,

THETAKEAWAY: UKGross Domestic Product to Expand at Lower Pace > Speculation on FurtherQuantitative Easing in May was Dampened > the SterlingExtends Loss

The report issued byNational Institute of Economic and Social Research (NIESR) todayshowed that U.K. economy might expand in three months ending inFebruary, dampening speculation on further quantitative easing inMay. U.K. Gross Domestic Product was forecasted to grow by 0.1percent in the quarter through February, after consecutivelycontracting 0.2 percent in the quarter through January and in thequarter through December. Though the recession isreported to be over, period of depression is “likely tocontinue for some time”. The research organization alsoprojected that “the UK’s economic recovery to take holdin 2013” and the output is “unlikely to pass its peakin early 2008 until 2014”.

NIESR Gross Domestic Product Estimate, Monthly Change: June 2010 to Present

Prepared by Trang Nguyen

The NIESR employsstatistical projection techniques, thus its estimates are veryclose to those for official GDP numbers. Theindependent research organization is predicting that U.K. economyresumed growth in the quarter ending in February as gains inindustry and construction outputs far more offset declines inagriculture products. Industry outputprobably increased 1.3 percent while construction output might edgeup 0.2 percent. In contrast, agriculture production was estimatedto drop 2.5 percent to the lowest level in nine months. Besides,output in private sector is estimated to rise 0.4 percent whileoutput in public services might fall 0.2 percent.

The latest officialfigure showed that GDP in United Kingdom shrank 0.2 percent in thelast three month of 2011. The fourth quarter decline prompted theBOE policy makers to inject a further 50 billion pounds intothe economy inFebruary to stimulate growth. Atits monthly policy meeting yesterday, the Bank of England heldtarget rates steady at 0.5 percent and keeps its level of assetpurchases at 325 billion pounds amid signs the economy avoidedanother recession. It is evident that the better near-term growthoutlook and downward pressure from economic slack will reduce beton further quantitative easing in May.

GBP/USD 1-minute Chart: March 9, 2012

Charts createdusing Strategy Trader – Prepared byTrang Nguyen

British pound lose its footing against U.S. dollar and higher-yielding currencies in North American morning trade today after the Greece pushed through the biggest sovereign restructuring in history, dampening demand for assets linked to European growth. In the minutes after the NIESR Gross Domestic Product report, the sterling extends loss versus the greenback. As can be seen from the 1-minute GBPUSD chart above, the currency pair fell nearly 20 pips from 1.5703 to 1.5753. At the time this report was written, the sterling traded at $1.5678.

--- Written by Trang Nguyen, DailyFX Research Team for DailyFX.com

To contact Trang, email tnguyen@dailyfx.com
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/03/09/030912_GBP_NIESR_Gross_Domestic_Product_February.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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