Third quarter GDP shows that the British economy grew by 0.3% following a 0.2% contraction from April to June 2019. The actual number narrowly missed forecast which was for a 0.4% uptick in growth. This puts the country’s annualized GDP to 1.0% compared to July-September 2018.
A deeper look at the report shows that the UK’s services sector was the main driver for growth in the months of July to September, posting a 0.4% uptick. Construction activity also grew by 0.6%. On the other hand, production and manufacturing were stagnant.
On a monthly basis, the British economy lost the momentum it had at the beginning of the quarter. It posted a negative 0.1% reading as it saw contraction across production, construction, manufacturing, and agriculture while services was at 0.0%.
GBPUSD gapped down immediately at the wake of the report’s release. However, losses on the currency pair seems to be subdued. There was wide skepticism among market participants for a negative reading. Therefore, the 0.3% figure could be a welcome relief to market participants despite it missing expectations. After all, this means that the UK has avoided a technical recession because it did not post back-to-back quarters of negative growth.
As of this writing, GBPUSD is trading around its Asian session highs at 1.2805. Using the Fibonacci retracement tool on the hourly time frame with the high of November 7 and the low of November 8, we can see that GBPUSD has pulled back to the area between 23.6% and 38.2% Fib levels. This level is also coincidentally the neckline resistance on the double top chart pattern on the 4-hour time frame which I pointed out in my earlier post.
If there are enough pound bulls in today’s trading, we could see the currency pair pull back to the higher Fib levels and possibly test the falling trend line (connecting the highs of November 1, November 6, and November 7). Whether or not GBPUSD would break resistance at the Fib levels and trend line will probably depend on the remaining high-impact economic reports scheduled this week.
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