The British Pound has been back in focus today given the rather packed data schedule we’ve seen across the European morning, including several economic releases and BOE governor Andrew Bailey speaking. There were some positives in the data though, on the whole, it was largely disappointing and we’ve seen GBP trading a little lower subsequently.

GDP & Trade Balance Weaker Than Expected

The headline preliminary GDP reading for Q3 came in at 15.5%, confirming a solid recovery from the prior quarter’s -19.8% reading. However, it was a little below the 15.8% estimate. The monthly reading was even more disappointing; at 1.1% it was below both the prior month’s 2.2% reading and the 1.5% estimate.

The goods trade balance was also weaker than expected, showing a widening deficit. At -£9.3 billion, the trade balance was far worse than the prior -£6.8 billion and slightly worse than the -£9.2 billion expected. The index of services also missed the mark. At 14.2%, as with GDP, a strong recovery was seen from the prior 3 months’ reading of 6.9%, though, again, it was just below the 14.6% reading the market was looking for.

Further Data Weakness

Among the other data releases this morning, industrial production was seen at 0.5% month on month, marking a rise from the prior 0.3% reading though, again, undershooting expectations of a 0.9% reading. Manufacturing production was even weaker; at 0.2% on the month, the indicator was below both the prior month’s 0.9% reading and the expected 0.7% reading.

Preliminary business investment, which is a closely watched reading used to gauge the outlook and sentiment in the business community, was also disappointing. At 8.8% on the quarter, preliminary business investment confirmed a strong recovery from the prior quarter’s -26.5% reading, but was well below estimates of a 14.4% reading.

Ultimately, only monthly construction output beat expectations at 2.9% on the month, beating the 2.1% projection. Though even that reading was below the prior month’s 3.8% reading. In all, it was a fairly poor day for UK data.

BOE's Bailey Optimistic Over Vaccine

Speaking this morning, BOE chief Bailey said that the GDP data was in line with what it expected, showing that a firm recovery had been made though also showing that there is still a large gap that needs filling. However, Bailey was keen to strike an optimistic tone in regards to news of the vaccine, saying: “It’s obviously encouraging us. I mean it’s encouraging for individuals, it’s encouraging for businesses and it’s encouraging for the economy,” though did say: “I think we have to be cautious because obviously there’s still quite a way to go in terms of the trialling.”

Technical Views

EURGBP

From a technical viewpoint. Following the breakdown below the rising channel, price has since tested the .8861 support. This is a key support level for EURGBP which, if broken, will open the way for a test of the .8677 level next. While the .8861 level holds, however, we could see a rotation back towards the .9097 level which bulls will need to break to regain upside momentum.

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