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UK GDP Revised Up

• Posted by currencies in Bank of England, Brexit, Currency, Dollar, Economy, EUR, GBP, Sterling, UK, Uncategorised
• June 29, 2018
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As we head into day 2 of the EU summit a review of Brexit negotiations is expected to take place amid limited progress on the Irish border issue in recent months.

The UK’s proposed solutions – a ‘customs partnership’ which involves collecting tariffs on behalf of the EU or ‘max fac’ which uses technology instead – have so far been given short shrift by the EU.

The EU is also expected to ask for further clarity on the UK’s position (the cabinet is due to hammer out the UK’s position on post-Brexit arrangements next week), and to call for preparations to be made for the possibility of a ‘no deal’ scenario.

With sterling under renewed pressure, focus today was on the third estimate of Q1 GDP and the first official estimate of service sector output for April.

As we expected there was a good chance that Q1 GDP growth, which was afflicted by snow disruptions, may be revised higher to 0.2% from 0.1%. As the results were released that’s exactly what has happened. Sterling gained 0.2% on the back of the data release.

In Europe, we expect the ‘flash’ CPI inflation estimate for June to edge up to 2.0% from 1.9%, but for the ‘core’ measure to fall back to 1.0% from 1.1%. Thus, while the ECB is set to wind down its asset purchases by the year-end, the first interest rate rise is not expected until well into 2019 at the earliest.

In the US, we look for personal spending to rise by 0.6% (consensus: 0.4%) and for the PCE deflator, the Fed’s preferred inflation measure, to rise to 2.3% (consensus: 2.2%) from 2.0%.