26 February AtoZForex, Lagos – The sterling stabilized a bit after data yesterday showed that the UK economy recorded a solid growth of 0.5% in the final quarter of 2015, in line with economist’s forecast. However, reports of a surprise drop in business spending have heightened fears of a potential slowdown in the months to come. It remains unclear if the growth is sustainable as the nature of the factors driving the expansion seem precarious. Consumer spending was strong, while exports struggled, manufacturing stagnated and business investment fell at the sharpest pace for almost two years.
Further growth is now expected to soften, due to the tough global economic outlook, as well as the risk of a Brexit in the upcoming June EU referendum. Further giving insight into the condition of the UK, Bank of England (BoE) Governor Mark Carney is expected to deliver a speech today. While we also have the US prelim GDP q/q, as the G20 meeting commence.
BOE Gov Carney Speaks
Speaking at the G20 meeting in Shanghai, Governor Carney reiterated that the global economy risks becoming trapped in a low growth, low inflation, low interest rate equilibrium. Data released yesterday showed the UK economy had to lean heavily on consumer spending drive its growth in the last three months of 2015. There is also the looming risk of a Brexit. London’s mayor, Boris Johnson’s decision to support the country’s exit from the European Union sent the sterling to a seven-year low against the dollar and spurred a selloff in British stocks. Any further concerning comments could send the GBP further down.
With a lot to talk about the G20 meeting the agenda, China’s economic condition remains a major aspect of discussion. As the meeting commenced, China’s central bank chief assured today to avoid weakening the yuan to boost sagging exports. In a bid to reassure nervous financial markets about China’s handling of its economy and currency.
US Prelim GDP q/q (1:30 P.M GMT)
The second estimate of fourth quarter GDP is expected to show an even more disappointing end to 2015 for the US economy. Forecasts point to a fourth quarter GDP growth of 0.4%, down from the 0.7% first reported last month. The USD has been mixed, however, a disappointing report is likely to weaken the currency across board on growing negative sentiment against the USD.
Think we missed something? Let us know down in the comments section.