Investors await Thursday's Q3 GDP data, with a consensus of 0.7% growth potentially fueling further Bank of England tightening and supporting the British Pound.
The preliminary Q3 GDP reading due Thursday, November 12 at 07:00 GMT is forecast at 0.7% QoQ versus 0.5% prior, with the annual rate seen accelerating to 1.9% from 1.4%. A strong print would endorse BoE officials' comments about further hikes (Deputy Governor Lombardelli said Tuesday she would not rule out a December hike) and spur speculative demand for the Pound. Counterpoint: the outcome is a forecast, not confirmed data, and the BoE stresses inflation rather than growth.
The article says GBP/USD risk is skewed to the upside into Thursday's Q3 GDP print, as a strong reading would boost odds of another BoE hike. However, the pair trades near 1.3320 after a sharp Tuesday reversal driven by strong US inflation data and hawkish Fed speakers, with bears targeting 1.3270 and 1.3130 while below 1.3380. Upside GDP hopes and a resurgent Dollar largely cancel out.
The neutral UK budget, which pays for lower food and energy charges with higher taxes on banks and gambling companies, has not drawn any significant objection from bond markets, calming fears about the hefty public debt. This is supportive but only a passing observation with no concrete yield figures.
The UK economy is expected to show 0.7% growth for Q3 in Thursday's preliminary report, up from 0.5% in the second quarter. A strong reading would support recent hawkish signals from the Bank of England, including Deputy Governor Clare Lombardelli's comments that a December rate hike remains a possibility.
The preliminary Q3 GDP estimate is released Thursday, November 12 at 07:00 GMT, with the market expecting 0.7% growth versus 0.5% in the previous quarter.
A strong GDP reading supports the case for further Bank of England rate hikes, which make Sterling more attractive to investors, as highlighted by officials' recent hawkish comments.
Bears target the late October lows near 1.3270 and the key area near 1.3130, while a return above 1.3380 would ease bearish pressure and target 1.3460 and the 1.3500 area.
A stronger-than-expected 0.7% reading would boost odds of another BoE rate hike and skew the pair to the upside, while a weak print would support the prevailing bearish trend.
The article notes the feared bond markets have not shown any significant objection to the budget plans so far.