UK gilts jump after Q1 GDP misses consensus estimates; BoE Governor Carney’s speech in focus

The UK gilts jumped during European session Friday after the country’s gross domestic product (GDP) for the first quarter of this year disappointed market expectations, leading to higher demand for safe-haven assets. Now, market participants shall now be focussing on the Bank of England’s (BoE) Governor Mark Carney’s speech, due today by 14:00GMT further direction in the debt market.

The yield on the benchmark 10-year gilts, slumped 6 basis points to 1.44 percent, the super-long 30-year bond yields plunegd 4-1/2 basis points to 1.84 percent and the yield on the short-term 2-year traded nearly 8 basis points lower at 0.81 percent by 10:20GMT.

The UK economy grew at a paltry 0.1 percent in the first quarter, far slower than both the expected 0.3 percent and the previous 0.4 percent. The alarming slowdown will cause a major headache for the Bank of England who were as recently as last week widely expected to raise rates once more in May.

The data of late has been consistently below forecasts and this now means that a move to increase next month would be a very bold call from Carney and in all likelihood the bank will decide to stand pat. Today’s disappointing data has all but ended any hopes for a May rate hike, with Carney and his fellow MPC members surely now likely to stand pat and bide their time before tightening policy further.

Meanwhile, the FTSE 100 traded 0.64 percent higher at 7,469.42 by 10:25GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained highly bearish at -171.48 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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