The Office for National Statistics (O.N.S.) reported the United Kingdom....
The Office for National Statistics (O.N.S.) reported the United Kingdom (U.K.) had lower gross domestic product (G.D.P.) in the final quarter of 2011 by 1.2%. For the year G.D.P. went higher by 0.9% much less than the previous year’s (2010) annualized comparison of 2.1%, and lower than analysts’ expectations of 0.1%. The quarter reduction was the first economic contraction seen since the final quarter of last year (2010) and linked to lowered productions in the construction and manufacturing sectors. Thus, Chancellor George Osborne has committed to continuing the coalition government's austerity program with fear for worsening of the country’s accumulation of debt. The austerity plan will implement additional spending cuts of £107 billion as well as increase taxes through 2015. Others say the austerity package will fail to reduce the debt problem and that it needs to focus more directly on unemployment and economic growth.
The government is seeing fewer receipts from taxes as well as an increase in unemployment benefit payments. As the European fiscal dilemma is largely affecting global economic conditions, economists expect the country (U.K) G.D.P. to continue reduction in the first half of the year (2012) and likely cause economic recession. Lack of economic growth has been due to low credit availability, unchanging wages, weakening business and consumer confidence, increasing unemployment and increased costs of living. These factors combined will make deficit reduction goals more difficult to achieve. Thus, the Bank of England (B.O.E.) is expected to provide additional stimulus to combat the country’s difficulties. The bank may provide as much as £75 million in quantitative easing next month. The central bank’s Monetary Policy Committee meeting Wednesday resulted in holding off changes to the monetary policy yet officials appeared ready to offer additional actions to stimulate the economy if needed. The country’s interest rate sits at a record 0.5% low and asset purchases at £275 billion.
The GBPUSD has rallied in the past several sessions. The pair is approaching 1.5700, which is the next level of resistance. If the pair breaks above 1.5700, we might see a new high established. On the other hand if the pair fails to break above 1.5700, we expect the pair to consolidate around the level.
Eugene Ross, Analyst
Admiral Markets
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