The pound sterling was relatively calm in response to the release of UK Gross Domestic Product (GDP) yesterday today (13/October) which contained various interpretations.
The GBP/USD continues to circulate in the range of 1.3600s that have been inhabited over the past week. Meanwhile, that pair is flat in the range of 0.8480s.
So far, Only GBP/JPY which continued its bullish rally in the 154.60s range. That is in light of the growing gap in UK and Japanese interest rate projections.
The United Kingdom GDP grew by +0.4 per cent (Month-over-Month) in August 2021, missing consensus expectations of +0.5 per cent. Monthly growth data for the July period was also revised down.
The Yearly GDP is Better
That monthly growth data was down from +0.1 percent to -0.1 percent. The Annual GDP growth was recorded at 6.9 percent, which is better than consensus expectations of 6.7 percent (Year-on-Year).
However, the United Kingdom GDP is still 0.8% lower than the pre-pandemic levels. At the same time, a number of risks threaten the economy is going forward in the market.
The improvement in August may be related to the fading of July 'pingdemik' restrictions when more than 1 million people were in about the same time. That was said by Paul Dales.
As a Chief UK Economist at Capital Economics, He added that the recent widespread scarcity and fuel crisis may have made the growth was almost stagnant after August.
The Market Participants Reactions
The Market participants did not react strongly to these data. That is as British central bank (BoE) officials have expressed their readiness to raise the interest rates in the near future.
The market has now even taken into account the potential for a 10 basis point rate hike in November. It is despite the speculation for December 2021 and the first half of 2022.
The recent comment made by BOE represents that the (economic) growth is not the biggest factor. It is especially in the committee's decision to raise the interest rates in the coming months.
That is although it does provide the reason to be cautious. The analysts still expect that the policymakers may wait until 2022 to raise (interest rates), when more information on wage growth is available.
A Prediction made by the ING Bank due to the Situation
The ING Bank expects that the UK GDP growth to grow by around 1.4 per cent (Quarter-over-Quarter) in the third quarter of 2021. Is it reasonable enough to be reached?
Basically That's far weaker than the 2.1 percent growth expectations set out in the BoE's statement last September. However, certain circumstances may change everything ahead.
Elsewhere, the U.S. consumer inflation (CPI) reportedly rose slightly higher than the expectations. On Wednesday evening, the Labor Department noted something.
Based on their explanation, the United States CPI rose from 5.3% to 5.4% on an annual basis. On a monthly basis, the CPI increased from 0.3% to 0.4% in September.
The Supply Chain Problem must be Solved
Rising prices in the America began to be felt by the public in general. The price of food, rentals, and certain items began to rise. This condition requires the Joe Biden administration to immediately solve the supply chain problem.
That is because the economic growth is at stake. The supply chain bottleneck phenomenon has plagued the U.S. since its economy underwent post-pandemic normalization.
During a pandemic, the production of a number of goods is reduced. But after the Fed's stimulus was effective, COVID-19 was brought under control, many people were vaccinated.
The social restrictions began to be loosened, the recovery in economic activity was not accompanied by an increase in supply of necessities. As a result, demand is rising but goods are still scarce.
