It has been quite difficult to precisely judge the economic performance of the Britain in the recent months. Just last month, there was a positive borrowing figure by the UK government with exceptional retail data along with equally outstanding employment increases and inflation fall to three successive lows. On the other hand, construction, export and industrial data have been relatively showing poor performance. This diversity in data presents a very risky standpoint for many currency traders because of the increased risk of being caught on the other end of the continuum.
Traders are at a high risk of stumbling on a landmine when the latest GDP readings will be released. Economic analysts predict that a 0.6% quarter-on-quarter expansion coupled with a 0.4% decline in the second quarter is imminent. This could perhaps show a good sign for the UK economy. Recently, GDP data for the second quarter was adjusted from a preliminary approximate of just 0.7% decrease but the estimate was short 0.3%. This is not a deviation from recent data collected as compared to the second and third quarter in 2009. The problem is not something anticipated during the mid 80’s to the early 90’s wherein traders had to handle similar constraints.
Many have stated they do not feel the GDP as a reliable indicator that traders should consistently use as compared to using the purchasing the index data which is compiled mainly by his company. That result proved to be a far superior indicator than GDP in most recent times.
While the domestic market is still sluggishly slow, weak global growth is pulling the UK’s economy. As a trade dependent and export focused economy, this has badly affected export activities which in turn decreased further the demand for sterling. There may be room for sterling to rise up such that annual data will be better than speculated but given the scenario, traders are still hooked with the Eurozone situation and the US elections and that flat data will certainly have no effects on the market.
If GDP discloses on the upside, there will be a further need to check for confirmation by several other economic indicators such as retail and PMI data which in the medium term, prior to the sterling-dollar moving towards the £1.62 level.
Sterling-dollar is in a curious place at hand with both the UK and the US economies have debated their currencies through quantitative easing which many believe to be a war of attrition between the two and are both unsightly to look at.
With the pair on a seemingly sliding trend since mid-September, traders are advised to go with the flow. Sometimes the best thing for traders to do is to make a call and contemplate on how things affect each other. Furthermore, traders need to take the risk for a strong reason and if such motive is absent better stay put and keep away.