- UK GDP flat in third quarter
- There is resistance at 1.2287 and 1.2344
- 1.2183 and 1.2091 and are providing support
The British pound is steady on Friday. In the European session, GBP/USD is trading at 1.2219, down 0.02%. The pound is coming off a nasty four-day slide, which declined 1.19%.
GDP Flatlines in Q3
Today’s UK’s GDP numbers weren’t pretty, but they managed to beat the forecasts, which has helped the British pound stabilize after a disappointing week. The economy flatlined in the third quarter, below the Q2 reading of 0.2% q/q but higher than the market consensus of -0.1%. Monthly, GDP eked out a gain of 0.2%, versus a revised 0.1% in July and above the market consensus of 0.0%.
The lack of growth in the third quarter is nothing to cheer about, but at least the UK will avoid a recession this year, defined as two consecutive quarters of negative growth. High-interest rates and stubborn inflation continue to squeeze consumers and businesses, and a sharp drop in house sales has dragged down the services sector. Consumers are in a sour mood due to the cost of living crisis and are expected to cut down on Christmas shopping.
The Bank of England lowered its growth forecast for the fourth quarter at its meeting earlier this month when it kept interest rates unchanged. GDP is expected to rise just 0.1% q/q. Inflation is projected to fall back to the 2% target at the end of 2025, six months later than the previous forecast. Governor Bailey has been stressing that inflation remains too high, but the BoE nevertheless voted to hold rates after 14 straight increases. Another pause at the December meeting would be the central bank’s preferred plan of action, data permitting.