The pound has just dipped following the release of first quarter UK growth (GDP) numbers.
They came in lower-than-expected, with growth estimated at only +0.1% from the previous quarter and +1.2% on the year (versus expected +0.3% and 1.4% respectively). The annual growth figure represents the lowest reading since Q2 2012 and it has significantly reduced the odds of a BoE rate hike for May. Money markets are now only pricing in a 32% chance of a hike compared to odds of over 50% ahead of this release.
A weaker figure was expected by many forecasters because of the poor weather we experienced over that period. However, the concern comes from comments made by the ONS who claim the shortfall had very little to do with weather-related symptoms. If the latter is indeed true, then this is surely a major concern for the BoE and something they can’t overlook. Are there some deeper underlying causes for this sluggish pace of growth? Time will tell.
As a result, the GBP/USD has fallen a cent today and now trades at a 7-week low. It’s now moved down over 5-cents in the past 10-days and close to testing some major support levels. The GBP/EUR has dipped around 0.75 cents but remains reasonably buoyant as traders switch from the Euro into the USD.