UK Growth Falls in March

The latest set of UK economic data has added to concerns for the UK economy. On the back of the BOE yesterday warning that inflation was likely to persist at higher levels for longer than previously thought, the economy was seen contracting by 0.3% in March. Data released by the ONS today showed an unexpected monthly drop in growth, which was expected to remain flat month on month. The quarterly figure was slightly more encouraging with Q1 growth seen at 0.1%, up from the 0% seen over Q4 2022.

BOE Revises Growth Higher – Market Unconvinced

The BOE struck a more optimistic tone on growth at yesterday’s meeting which is offering some encouragement. While growth is expected to remain flat over the first half of the year, GDP is expected to pick up into the back of 2023 before lifting sharply next year. For the year as a whole, the BOE revised its GDP forecasts higher to 0.25% from -0.5% prior.

However, with inflation now forecast to linger longer at higher levels and with fears growing over the prospect for a fall in house prices as well as increased levels or mortgage delinquencies, traders don’t appear convince by the bank’s forecasts. As such, the monthly drop in GDP is a worrying sign that, on the back of further tightening, growth in the UK is headed lower not higher.

Technical Views

EURGBP

The reversal lower from the .8861 level has seen the market breaking down through the rising trend line and through the .8719 level support. Price is currently attempting to reclaim the level which, if seen, will put focus on a further move higher. Below here, however, focus stays on .8597 as the next support to note.