UK GDP reading could play into BoE’s hands

<p>Tomorrow sees the announcement of the preliminary fourth quarter UK GDP figure. Spread bettors and CFD traders should watch the announcement closely for both indices […]</p>

Tomorrow sees the announcement of the preliminary fourth quarter UK GDP figure. Spread bettors and CFD traders should watch the announcement closely for both indices and forex markets, which could turn a shade volatile around the announcement, says City Index Market Strategist Joshua Raymond.

The UK GDP is expected to slow for another consecutive quarter to 0.5%, down from the 0.7% growth in the third quarter and 1.1% growth recorded in the second quarter.

A strong GDP could play into the hands of the Bank of England

Last week’s UK Inflation figure, which spiked to a new eight-month high of 3.7%, could force a sooner-than-expected rise in interest rates. An early interest rate hike unfortunately timed to coincide with public spending cuts and the recent VAT hike could all combine to poses a significant threat to the UK GDP slipping back into contraction mode.

 

Data   Expectations  Last Reading
GDP quarter-on-quarter 0.5% 0.7%
GDP year-on-year 2.6% 2.7%

 

If we get a stronger reading than the 0.5% figure that most market participants are expecting, this could go some way to helping to calming those double-dip fears. That said, a strong number could play into the Bank of England’s hands to free up more maneuvering on interest rates.

UK GDP Q4 chart

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