Revised estimate of the UK GDP was slightly higher than the initial print for the third quarter, while trade deficit shrank to the lowest level since 2012, data showed on Friday. The pickup in economic indicators supported British currency after a brief dip below 1.30. On Thursday, the Bank of England casted clouds on the country’s growth outlook despite the apparent decrease in uncertainty associated with Brexit after the general elections.

The country's GDP grew by 0.4% in the third quarter, above the preliminary estimate of 0.3%. The contribution of the services sector and the construction sector has been revised upward.

Activity in the British economy slowed significantly after the referendum in 2016, which were further exacerbated by the trade confrontation between the United States and China and the subsequent slowdown in the economy in Europe. For the year ending in September, the economy grew by only 1.1%, contrary to the forecast of Reuters economists at 1.3%.

1-19.png

The National Statistics Office said that accelerating export reduced trade deficit from 24.15 billion pounds in the second quarter to 15.8 billion pounds in the third quarter of 2019, which was in line with market expectations. In percentage terms, the trade deficit fell to 2.8%, the lowest level since 2012.

Speculative ebb and flow in GBP before the elections and after the win of Tories, corresponds to BoE statement that it is too early to say that "the risks associated with Brexit have diminished".

The reason for this is the so-called “cliff-edge” scenario for withdrawing the country from the block that Johnson proposed. This implies a “tough”, almost ultimatum scenario of the negotiations, which maintains the risk that two the states can establish trade relations according to general WTO rules. In fact, this is the “hard Brexit” scenario, the risks of which kept investors in suspense before the December general elections.

Such expectations may be accompanied by a fall in the attention of foreign investors to British assets, what will put additional pressure on the British currency, as well as create difficulties for British firms to get cheap financing.

The Bank of England said at the meeting on Thursday that there were not enough incoming signals from either the economic or political front to talk about reduction of the uncertainty associated with Brexit. This completely erased all the optimism priced in the pound before and after the “favorable” election outcome.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

 High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% and 71% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.