The final revision to the first quarter GDP for 2015 showed that the UK economy expanded by 0.4% against earlier estimates of 0.3%. The third and final revision comes after the initial estimates of 0.3%. On an annualized basis, UK’s growth comes in at a stable 2.9%, beating estimates of 2.5% and up from previous estimates of 2.4%.
The index of services remained unchanged at 0.5%, matching estimates.
The change in the UK GDP was on account of introducing the construction sector to calculating the GDP growth. Looking into the details however, the services sector which accounts for the largest share of the GDP calculation remained unchanged at 0.4% (a drop from 0.9% from the previous quarter).
The GBPUSD spiked to post an intraday high to 1.5745 before easing lower. GBPUSD continues to trade sideways within yesterday’s range of 1.5787 high and 1.56715 low.
The EURGBP was more pronounced as the Euro declined to trade near the 0.709 handle.
The ONS also released the current account deficit for the UK, which was revised down to £28.4 billion from earlier estimates of £26.5 billion on account of a drop in government deficit and investment income.
Earlier in the day, Switzerland GDP data was also released, which saw the first quarter GDP confirmed at 0.5%, slightly higher from previous estimates of 0.4%. On an annualized basis, GDP for the year grew 1.7%, up from 1.6% previously estimated. The Swiss Franc however did not react much to the news as the currency was under pressure from the SNB’s forex intervention yesterday.
The North American trading session will see the GDP numbers from Canada being released. Expectations heading into the GDP data is for a monthly growth of 0.1%, after declining -0.2% previously, while on an annualized basis, Canada’s GDP is expected to remain unchanged at 1.5%.
Last week, the US first quarter GDP was released which saw the economy contract at a rate of -0.2%, better than previously expected rate of -0.7%. The US and UK economies are the only two major economies that are on the path to posting a healthy GDP growth rate and look poised for a potential interest rate hikes, compared to other G7 economies. Monetary policy divergence has been the main driving flow in the Fx markets. While the US looks set to hike rates in September this year, the markets expect the UK to follow suit for rate hikes in early 2016. BoE voting members have so far remained unanimous on keeping interest rates unchanged at 0.5%, but comments during speeches by various MPC members is starting to indicate that the Bank of England could potentially hike interest rates sooner than later, with inflation being the only sore point.