UK Q3 GDP was unexpectedly been revised higher in the third release of the data, to 0.6% q/q growth from 0.5% q/q, though the y/y figure was nudged downward, to 2.0% from 2.2% previously estimated. Q1 and Q2 growth were also revised lower, to 0.3% q/q and 0.6% q/q, down for 0.4% and 0.6%, respectively. Growth of 1.0% q/q in the predominant service sector drove the q/q expansion in the economy in Q3, helping mask one or two worrying signs, including a 0.4% drop in business investment and a0.6% erosion in disposable incomes. The revisions in the data also showed that the UK economy grew at exactly the same rate in the three months after the referendum as in the three months before. Additionally the UK’s current account deficit rose to £25.5bn in the third quarter from £22.1bn in the previous three months, and although the figure is less than the £27.45bn expected by economists, it means that the deficit is now 5.2% of GDP compared to a previous 4.6%.
Creeping price pressures, caused by the weaker pound and which most economists expect will erode real incomes of households, and Brexit-related uncertainty, which is also ready suppressing business investment, suggests 2017 will be a challenging year for the UK economy. GBPUSD looks to be drifting down sub 1.2200 again (RSI, MACD, Parabolic SAR and Bollinger bands all agree) to the next support at 1.2160 and then possibly 1.2085.
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