Dear Kizzi,
A flurry of mixed data out from the UK this morning as UK GDP figures for November indeed surprised on the positive side although in negative territory following six consecutive monthly increases. At -2.6% versus the consensus of -5.7%, the UK economy is not contracting as fast as expected.
The better-than-expected GDP got a boost from a rising Construction Output at +1.9% whilst Services acted as the main drag, but still displayed a milder contraction than feared at -3.4% vs -5.7% expected.
On the flip side, Industrial Production is still struggling and fell -0.1% for the fifth consecutive month whilst Manufacturing Output rose but unsurprisingly stays under pre-pandemic levels. Lastly, the Total Trade Balance emphasized a ballooning deficit of £-4.99Bn vs £-1.7Bn expected.
As a whole, it’s difficult for markets to paint a clear picture given the context of lockdown measures clamping down the UK economy as well as added customs frictions and a cloud of uncertainty surrounding financial services post-Brexit. A double-dip recession is indeed looming in the longer term but the data released today doesn’t warrant a hit of the panic button and GBP seems to be holding its ground, yet again.
Olivier Konzeoue, FX Sales Trader at Saxo Markets