The UK economy saw a slight pick-up in growth in the second quarter with a 0.3% increase seen in like for like terms. The pace of economic growth has already been in the headlines this week after the IMF shaved 30 basis points off their full year projection for the UK - the largest downward revision seen in any of the advanced economies - and this morning’s number was broadly inline with expectations.
As has been the case for the past 12 months, potential headwinds from Brexit remain by far and away the biggest threat to the economy, and there are beginning to be warning signs of a slowdown in the GDP numbers. A 0.3% increase is the joint worst reading for this indicator since January 2013 and the economic activity will have to rise markedly in the second half of the year to even meet the newly lowered IMF projection.
Having said that, the GDP release is backward looking and lagging in nature and therefore is sometimes seen as secondary to PMIs in accurately reflecting economic health. In light of this the "soft" data remains fairly upbeat and with the labour market at exceptionally strong levels by historic standards the outlook on the whole for the UK could be described as mixed. In terms of market reaction the GBP/USD has initially dropped lower by around 25 pips and the pair now trades back near the 1.30 handle. With the Fed meeting tonight the pair could be in for a volatile next 12 hours.