GBP / USD. Britain's economy has slowed down, but the pound will wait for May's speech

The British currency today received another blow. Data on the growth of GDP and industrial production were in the "red zone", demonstrating a rather significant slowdown. The almost three-year period of uncertainty affects the main macroeconomic indicators of the country, and this fact is increasingly reminded of itself. Against the background of such trends, the negative news on Brexit is felt by traders especially acutely. Unfortunately, the latest news regarding the prospects of the "divorce process" is extremely negative and alarming.

So, the growth of the British economy has slowed. Official figures today confirmed the fears of many experts and analysts. On a quarterly basis, the indicator fell to 0.2% (after rising to 0.6% in the third quarter of 2018), and in annual terms to 1.3% after rising to 1.6%. On a monthly basis, a similar picture emerged. GDP in December fell into a negative area (for the first time since last February), reaching a level of -0.4%. In other words, after temporary growth, the British economy slowed down again, contrary to certain hopes of economists.


Some structural parameters of the published release even set an anti-record. Thus, the rate of business investment has been falling for four quarters in a row (that is, throughout the past year). This persistent trend has not been for almost 20 years, to be more precise, since 1992. On the other hand, such a dynamic is quite understandable, since Britain has been living in a mode of uncertainty for the third year already, and among the possible scenarios for the development of events (and the most real ones) is the chaotic exit of the country from the EU. It is obvious that such fundamental conditions have spoiled the investment climate in the country for such a long time, and the published figures only reflected this fact.

Greatly disappointed and data on the volume of industrial production in Britain. Let me remind you that in August last year, this indicator (on a monthly basis) dropped to zero. In September, it went out at the same level, and in October, it collapsed into a negative area, from where it cannot get out until now. Today, experts expected a positive trend (up to 0.1%), but their forecasts did not come true. The indicator not only remained in the negative zone but also showed the most negative trend since April last year.

The production sector turned out to be the weakest link in the release, it fell immediately to -0.7%. In monthly terms, this is the strongest decline since January of the year before last. In general, the decline in production was recorded in nine of the twelve sectors. The production of pharmaceutical preparations stands out particularly strongly (in a negative sense), the indicator fell to -5%.


Almost all experts unanimously blame Brexit for everything that happens. March 29 is inexorably approaching, while London and Brussels are still at opposite poles of opinion. Literally, over the weekend, Theresa May rejected the script that could bring the situation out of the impasse.

Let me remind you that the Europeans "strongly recommended" to listen to the leader of the Labor Party, Jeremy Corbyn, who offered to keep Britain within the framework of a customs union with the EU. In this case, he assured the prime minister that the Labor Party would ensure a positive vote on the draft deal, thereby compensating for the lack of votes among the conservatives. In other words, Brussels supported the idea of Labor, who, in turn, was ready to put an end to the long-term epic of the negotiation process.

However, Theresa May "in tatters" criticized this initiative. On Sunday, she published an open letter, where she rejected the proposed idea in a rather harsh manner. In particular, she said that Britain should have the opportunity to conclude its own trade deals, and the laborists only offer to participate in the trade policy of the European Union, giving London a "supporting role".

In other words, the next hopes of the supporters of the "soft" Brexit collapsed. The situation remains in limbo. According to the spokeswoman Theresa May, she will make a statement tomorrow in parliament regarding further prospects in this matter. What the prime minister will say is not known for certain. But, according to a number of experts, tomorrow, May will "probe the soil" regarding the postponement of the Brexit date. And although she had previously categorically rejected this option, it seemed she had no other choice.

Brussels showed its principles and did not agree to provide London with legal guarantees regarding the operation of the backstop regime. May, in turn, refused to go on about the Europeans, rejecting the idea of Labor. The situation has again come to a standstill, but at the same time, no one is interested in the "hard" Brexit, so the postponement of Brexit's date, in my opinion, is the most likely scenario. If these experts' forecasts are justified, the pound will receive strong support, since in this case the probability of the chaotic Brexit will again decrease.

The material has been provided by InstaForex Company -