U.K. Q4 GDP remained stable at -1.5% q/q against wide expectations for a downward revision to -1.6% after weaker than expected December industrial production data. The annual rate was revised to -1.9%, however, in line with the median, from -1.8% in the initial release. Meanwhile, Q3 growth was revised down to -0.7% q/q and 0.2% y/y from -0.6% and 0.3% respectively. Breakdown of the Q4 GDP reading showed a sharp 0.7% q/q contraction in household spending growth, the sharpest negative reading since Q2 of 1991, while investment growth contracted by 2.3% q/q. Public spending growth rose by 1.5% q/q as the government tries to underpin the economy. Despite a weaker Sterling, exports fell 5.5% q/q as weaker global demand counterweighed. Overall, despite the unrevised Q4 q/q reading, data highlight that the current recession is as deep as what Britain experienced in the late 1970s and early 1980s.
Meanwhile, GBP eased after U.K. Q4 GDP. Cable is changing hands in the mid 1.45's after running in to supply from a U.S. house around the 1.4600 area. An Asian central bank was also reported in the mix, while GBP-JPY backed away from its 141.75 peak to trade in a narrower range around the 141.00 pivot. Bids appeared at 140.80 on the moderate pull back, while sellers came in above 141.30. Meanwhile, EUR-GBP is range bound ahead of 0.8800 after rebounding from Tuesday's 0.8725 lows. GBP price action was dominated by cross-currents and should continue in this vein, with the U.K. fundamental picture having only a limited impact of late. The value of sterling may become a bone of contention again, according to a Bloomberg news piece. It cited a document prepared last month by the European Commission and EU finance ministry officials that concerned over the pound's slide.
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