GBP: Breakdown of Q3 GDP highlights resilience of the UK economy - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the pound is continuing to trade on a firmer footing in the near-term following the release late last week of the latest UK GDP report for Q3.

Key Quotes

“The report provided further evidence of the UK economy’s resilience in both the run up and following the Brexit vote. The main surprise in the breakdown of GDP growth was that business investment defied expectations expanding for the second consecutive quarter by 0.9% in Q3. The BoE has been warning that business investment would be the most vulnerable to heightened uncertainty related to the Brexit vote, but so far the negative impact is not yet evident.”

“Economic growth was undermined by a large inventory drag in Q3 which followed a large build in Q2. For the two quarters as whole, the economy expanded solidly by an average annualized rate of 2.3%. If the UK economy continues to defy expectations for a material slowdown in growth in the year ahead, it will create scope for pound weakness to reverse further.”