Sterling against few majors shrugs off growth, Does BoE factor in Q2 GDP for rate cuts?

GBP crosses seem to have neglected the British GDP data which is better than expected, actual 0.6% versus forecasts at 0.5% and previous 0.4%.

GBP versus a few major G10 currencies are losing after better than expected Q2 GDP numbers.

GBPUSD lost from the highs of 1.3161 to the current 1.3104 levels, we think dollar holding mightier ahead of Fed’s monetary policy decision, while EURGBP has gained about 0.43% (i.e. from the lows of 0.8349 to the current 0.8390 levels). GBPCAD has dipped from highs of 1.7394 to the current 1.7277 levels.

For Q2, everybody thought this print would be likely to play a comparatively subordinate role for GBP exchange rates today but have a look at EURGBP, the pair seems to be absolutely shrugging off for the day. Spiked from the lows of 0.8349 to the current 0.8390 levels and upside potential is still intact.

This may probably because, after all, it is of less relevance for the Bank of England (BoE) to discount the odds of rate cuts which seems pretty  much on the table and if the central bank thinks as to how the economy developed prior to the Brexit vote, rather than afterwards.

It is therefore of little consolation that the economy recorded robust growth before the fateful EU referendum, now that there is even the risk of a recession.

According to a Bloomberg survey on Wednesday, consensus looks ahead for the U.K. to contract by 0.1% in Q3.

Investors were now eyeing the BoE’s upcoming policy meeting amid growing expectations for a rate cut.

As a result, Sterling would be unable to benefit sustainably even from a surprisingly strong growth figure. However, a surprisingly weak result may even increase pressure on Sterling as it would provide additional support to speculation about far-reaching BoE easing measures. In particular, as it would suggest that the British economy was under pressure even before the referendum.