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Forex News: UK Economy Enters Triple Dip Recession, Sterling Erases Gains

Benjamin Spier

THE TAKEAWAY: UK GDP fell 0.3% in Q4 -> UK economy enters a triple dip recession -> Sterling erases earlier gains

The UK economy has entered a triple dip recession for the first time in its history, and Pound investors are not happy. The UK gross domestic product contracted 0.3% in the fourth quarter of 2012, which was worse than the expected 0.1% contraction and a reversal from Q3’s 0.9% GDP growth. UK GDP was unchanged from Q3 of 2011, according to the UK Office for National Statistics.

UK production declined by 1.8% in the fourth quarter, while services output was flat and construction grew by 0.3%.

Weaker growth was predicted by the Bank of England, which said that the rise in Q3 GDP was due to the Olympics and the extra holiday in Q2. The UK entered a technical recession in the first two quarters of 2012, and the fourth quarter marks a triple dip recession since the global financial crisis. There is now worry that uncertainty surrounding the UK’s membership in the EU may deter business investments until the referendum which will take place between 2015-2017.

The Pound fell 50 points and erased some earlier session gains following the worse than expected GDP release. There were earlier rumors that the GDP for Q4 would be announced higher, which may have caused some buying ahead of the release. At the time of this writing, $GBPUSD is trading around 1.5775 in Forex markets. Support may be provided by a broken resistance line near 1.57500, and resistance may be provided by a broken support line around 1.5823.

GBPUSD Daily: January 25, 2013

UK_Economy_Enters_Triple_Dip_Recession_Sterling_Erases_Gains_body_gbpusd.png, Forex News: UK Economy Enters Triple Dip Recession, Sterling Erases Gains

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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