UK growth a little better than expected - market looking for more?
UK GDP in Q2 rose by 1.3% (yoy) which is pretty much as the market was expecting. Qoq, we saw 0.4% growth which was also on par with consensus so this pretty much explains the lack of reaction, though we suspect a stronger number would have had more of a positive influence given the BoE were citing better progress in the last quarter.
Other metrics were a little more positive though as we saw business investment up 0.5% vs 0.3% forecast. This is a pretty significant number given the perception that Brexit is slowing activity down. The numbers are prone to revisions, though for now this is a positive sign and that it is not all doom and gloom regarding Brexit.
Construction output rose by a solid 2.2% annualised, double what was expected, so the building industry is back on track. Industrial production came in at 1.1% and manufacturing 1.5%, and this was all capped off by a strong reduction in the trade balance which narrowed from -£12.53bln (deficit) revised to -£11.38bln (deficit).
All in all, these are positive signs on the economy, but we now know that GBP is only moving on political developments and Brexit risk is keeping pressure on the exchange rates for now. EUR/GBP is once again looking to push back to 0.9000 this morning after finding buyers again in the mid 0.8900's.
Cable is the one that everyone is watching though and this has now taken out a strong band of support seen at 1.2800-50 and 1.2770-75 also. Next up is a strong band of support seen at 1.2705-1.2580. A push through here suggests there is every chance we could go on to test the 1.2200-1.2300 which means we are back at panic times just as we saw in the aftermath of the EU referendum in 2016.