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Weakness In Economic Data In The U.K….

In this weekend update, we look at the weakness in economic data in the U.K.

We, as many investors, have been bullish on the pound as the Bank of England has been very hawkish on raising rates. This past two weeks of economic data have poured cold water on inflation expectations and rate hikes. The British economy has missed expectations on Average Earnings, Consumer Price Index, Producer Price Index, and Retail Sales. The pound held its own despite the missed expectations until Friday’s GDP data. Friday, GDP was expected to report a growth rate of 0.3% quarter over quarter. Instead, the report came in at 0.1% and the previous quarter was revised lower by 0.1%. Between the two quarters, the adjustments have squashed the rate hike hopes.

The pound gave up more than 1% on Friday alone, pushing the GBP/USD pair to retest a monthly low. If the pound clears this monthly low, the next expected drop could be 2% or more. The concerns over Brexit have diminished but the recent reports have investors unwinding their bullish positions on the pound and we too will be looking to exit our long pound positions until we see justification for rate hikes and sustained growth.


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