Worse Than Expected UK Growth Means Higher Chance Of Cable Turnaround

By David Schutz,

THE TAKEAWAY: UK GDP numbers weaker than expected -> speculation of further easing also weakening Sterling on fundamental side -> Cable drops 30 points despite optimistic official comments on Q1 2012 growth

The economy of Great Britain shrank 0.3% during 2012’s last quarter, the UK stats bureau said today in a release. The contraction was more severe than the forecasted 0.2% drop. The economy grew 0.5% when compared to the previous year, compared to 0.7% predicted.

Losses in the services sectors propelled the GDP pullback, a breakdown of the data showed. Particularly, rising fuel prices propelled an output decline in the air travel industry. Despite recent initial indications that Q1 2012 numbers would be better, speculation that the Bank of England will support another increase in quantitative easing continues to encourage downside risk in Sterling.

Board members voted unanimously to keep rates at ultralow levels, the most recent BOE minutes revealed, those who supported increasing quantitative easing but were outvoted 7-2. A majority of BOE members said increased quantitative easing would send a message that the economy is worse than it actually is; however, dovish board members Miles and Posen argued that more is needed to maintain the economy's supply capacity. Cable declined 30 points on the less that stellar GDP numbers, breaking through multi session support at 1.5922 to reach a session low by 1.5900.

Cable declined 30 points on the less that stellar GDP numbers, breaking through multi session support at 1.5922 to reach a session low by 1.5900.
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Original Article: http://www.dailyfx.com/forex/market_alert/2012/03/28/Worse_than_Expected_UK_Growth_Means_Higher_Chance_of_Cable_Turnaround.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.