Trading Forex and CFDs is risky

UK Q2 GDP Beats Expectations, however….

Market Analysis
2016-07-27_13-18-38

GBPJPY, H4            

Preliminary UK Q2 GDP beat expectations at +0.6% q/q and +2.2% y/y. The respective median forecasts had been for growth of 0.5% and 2.1%, which the figures are an improvement from +0.4% q/q and +2.0% y/y in Q1. Though the data is rear view, and to all but one week precedes the vote to leave the EU, it nonetheless shows the economy to have been in a stronger than thought position heading into to referendum. The ONS stats office said that “uncertainties in the run-up to the referendum seem to have had a limited effect. Very few respondents to ONS surveys cited such uncertainties as negatively impacting their business.” The data only briefly lifted the pound, however, which has since below pre-release levels. This is the legacy of the much more timely and forward looking flash July PMI data, a series which has historically been an accurate predictor of GDP. Markit, the compiler of the PMI survey, said the 47.7 composite outcome, disclosed last Friday, was consistent with GDP of -0.4% q/q. The PMI data was collected from after July 12, a good time after the June 23 Brexit vote and after the initial shock had passed.

The PMI data from Friday was also the catalyst for BOE MPC member and longtime hawk Martin Weale to change his position and call for immediate stimulus for the UK economy.  The MPC meet next week with the announcement scheduled for August 4 at 11:00 GMT.

Sterling against the greenback is approaching the weekly low of 1.3082, GBPJPY has lost the 138.00 handle and EURGBP is back above 0.8400.

The GBPJPY, 4H chart continues to look bearish as it trades south of the 20, 50 and 200 MA’s, the large volatility this morning producing tall wicks on the recent candles. A solid break over the 20 period MA would be required to take the pair positive.  At the Daily time frame in yesterday’s LIVE ANALYSIS webinar we discussed the SHORT position we had entered on the close of Monday’s candle at 138.77 with Target 1 134.50.

 

Click here to access the HotForex Economic calendar.

Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! The next webinar will start in:

Stuart Cowell

Market Analyst

HotForex

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.