FxWirePro: UK third quarter GDP preview

Today’s GDP figure will be released at 8:30 GMT from the Office of National Statistics (ONS). It is the first flash estimate of the third quarter GDP. The data is of extreme importance as it would represent the performance of the economy over a quarter after the referendum in June.

• The number, however, unlikely to be a key influencing factor for the pound and the FTSE100 as the focus has now shifted to the politics of the referendum.  Data, other than GDP figure has already shown that the UK economy has performed better than expected. Retail sales, PMI reports, industrial production; all have been better than expected.

Past trends –

• After the 2008/09 crisis, the UK economy has been growing at the fastest pace among its OECD peers.

• GDP growth reached the highest level in the second quarter of 2014, reaching 3.2 percent growth on yearly basis. Since then growth has somewhat waned. In last quarter of last year, growth was 2.1 percent y/y, same as the third.

• This year, the economy grew 0.4 percent in the first quarter and by 0.7 percent in the second quarter on a quarterly basis.

Expectations today –

• Today, GDP growth is expected at 0.3 percent q/q and 2.1 percent y/y. However, we suspect that the data might outperform expectations.

Impact –

• The pound is currently trading at 1.221 against the dollar. The sterling has reached our forecasted short-term target of 1.2. We have also forecasted for the pound to drop to parity in the longer run.