U.K. GDP is expected to have shrunk by another 1.5% in the first quarter as declining demand for exports and retrenching consumers continue to weigh on growth. The accommodative monetary policy by the BoE has failed to loosen the credit market which continues to leave consumers and business lacking the necessary funds to meet their demands and obligations.
[B]Fundamental Outlook[/B]
U.K. GDP is expected to have shrunk by another 1.5% in the first quarter as declining demand for exports and retrenching consumers continue to weigh on growth. The accommodative monetary policy by the BoE has failed to loosen the credit market which continues to leave consumers and business lacking the necessary funds to meet their demands and obligations. The central bank has since resorted to quantitative easing measures in an attempt to provide the necessary liquidity into the marketplace. However, the impact of those efforts won’t be realized in this release and therefore we could see weaker than expected growth. A deeper than expected contraction could weigh on the pound as the future growth outlook has already been lowered by the expectations of increasing tax burdens following the budget report. This could break the current stalemate between bulls and bears which is evident by the flat technical outlook.
[B]Technical Outlook [/B]
Cable has dropped beneath 1.4579 as well as a support line that had held since early March. This is a count that I presented yesterday in the EW forum. It is possible that an expanded flat is underway. If so, then wave C would end near 1.48.
For More Technical Analysis Visit the Daily Technical Report
[I]To discuss this report contact John Rivera, Currency Analyst: [email protected][/I]
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