GBP/USD: Short-Lived Reaction After Revised UK GDP Data

GBP/USD: Short-lived reaction after better-than-expected UK GDP data

Macroeconomic overview

The British economy advanced 0.7% on quarter in the three months to December of 2016, following a 0.6% expansion in the previous period and above the preliminary estimate of 0.6%. It was the highest figure in one year, as exports and government spending rebounded while household expenditure rose at a slower pace and fixed investment showed no growth.

From the expenditure side, the largest positive contribution to GDP came from net trade, which contributed a positive 1.3 percentage points, and household final consumption expenditure, which contributed a positive 0.4 percentage points. The negative contributions to GDP came from gross capital formation, which contributed a negative 1.1 percentage points.

The trade balance deficit narrowed to GBP 11.0 billion from GBP 17.2 billion in the third quarter. Exports jumped by 4.1%, following a 2.6% drop in the previous period, while imports shrank 0.4% following a 1.3% gain.

Technical analysis

The GBP initially climbed on a pick-up in UK growth, but quickly reversed course and is fluctuating near 14-day exponential moving average now. Long lower shadow on yesterday’s candlestick suggested the GBP/USD may be gaining momentum, but we need a confirmation of this signal today.

GBP/USD Daily Forex Signals Chart

Trading strategy We stay GBP/USD long for 1.2700.Source: – Daily Forex Trading Strategies

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