UK GDP In Line, But Skepticism Abounds

Last updated 2/25/2009 4:58 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

The revision of Q4 UK GDP left the number unchanged at -1.5% but the print was actually better than expected as the market consensus forecast a further contraction to -1.6%. The news confirms what much of UK data has been signaling over the past few weeks – namely that the economy in the British Isles may starting to bottom out.

While the data was hardly positive, it suggested that the aggressive fiscal and monetary policy moves by UK government officials along with rapid depreciation in the pound exchange rate may be helping to stabilize the economy.

Granted, the latest string of positive economic surprises could simply be a pause before another leg down, and the reaction in GBP/USD after the GDP release reflected that skepticism. The pair sold off in the aftermath of the news with pound bulls disappointed that the revisions were not better.

Nevertheless, UK data continues to underpin cable for the time being with 1.4400 acting as near term support. Meanwhile EUR/GBP, our favorite way of expressing pound strength traded back towards the 8800 handle after rallying on month end demand for the pair yesterday. Once the seasonal skews disappear we continue to believe that the pair could target 8500 should UK data continue to show further signs of stabilization.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.