The fourth quarter UK GDP data has beaten the market expectations as economic growth came in at the level of 0.5% while he market participants expected a 0.4% advance only. However, the estimate put growth for the whole of 2017 at 1.8%, lower than the previous year's figure of 1.9%. The Office for National Statistics said 1.3% growth in manufacturing had pushed the figure higher, although the construction sector contracted for the third quarter in a row, falling 1.0% The services and production sectors rose 0.6%, while agriculture fell 0.4%.
A growth in supply potential and wages seem to be picking up momentum again, so markets should more fully price in the risk of two UK bank rate rises this year. Moreover, certainly fair to say the UK economy has performed much better than many feared in the aftermath of the Brexit vote.
The GDP is an indicator for broad overall growth in the United Kingdom. Robust UK GDP growth signals a heightened level of economic activity, and therefore a high demand for currency. The economic expansion also raises concerns about inflationary pressure, which generally prompts monetary authorities to increase interest rates. This means that positive GDP readings are generally bullish for a given currency, while negative readings are bearish.
Let's now take a look at the GBP/USD technical picture at the H4 time frame. The market has broken through 261% Fibo Expansion at the level of 1.4277 and made a local high at the level of 1.4344 before reversing 270 pips towards the level of 1.4081. This level, together with the upper channel line, is now the key support for the price Please notice, the market is still trading in overbought conditions, so another leg down towards the support is expected.
