Sterling was severely shaken by the UK’s first quarter GDP reading, a troublesome figure made all the worse by the fact that the ONS warned March’s Beast from the East – a potential get out of jail free card for Q1’s abysmal growth – actually had ‘very little impact’ on the slowdown.
At a 5 year low of just 0.1% the GDP figure for the first 3 months of 2018 undershot the already weak 0.2% to 0.3% forecasts held by analysts. This immediately dealt a rather sizeable dovish blow to sterling, with a May rate hike from the Bank of England going from a near certainty at the start of the month, to a toss-up following Mark Carney’s comments last week, to now an almost complete dead end.
The shock of all this sent cable 0.9% lower, forcing sterling below $1.38 for the first time since the start of March – remember, it was only 10 days ago that the pound had climbed to a post-Brexit peak against the greenback, its decline across the second half of April tracking the gradually eroded likelihood of a May hike. Even with the euro’s own central bank issues, meanwhile, sterling dropped 0.8%, erasing the week’s €1.15-teasing growth in one fell swoop.
The FTSE using sterling’s stress-out to propel itself to a fresh 12 week high, surging 0.7% to cross 7470. The eurozone indices appeared similarly happy that the euro lost more ground to the dollar, with the single currency dropping below $1.21 for the first itme since mid-January; this allowed the DAX to jump above 12600 with a 100 point climb, while even the GDP-disappointed French CAC managed to eke out a 0.2% increase.
Turning to this afternoon and both the pound and the euro will be hoping the dollar gets a taste of its own medicine following the US Q1 GDP reading. Analysts are expecting a rather sharp decline between the fourth and first quarters, with forecasts pointing to a drop from 2.9% to 2.0% (at the annualised rate). The Dow Jones could also do with the greenback losing some of its gumption given that the futures have the index slipping under 24300.
Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved.