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UK: GDP and current account data takes Centre stage – SocGen

FXStreet (Delhi) – Research Team at Societe Generale, suggest that UK investors main focus will be on Wednesday’s release of UK Q2 current account data along with the final GDP figures.

Key Quotes

“The press focus has been on (upward) revisions to historic GDP data that highlight the UK's out-performance in recent years relative to the Euro area. I'll be looking at the current account data, which have been awful, albeit without adverse effect on the currency.”

“The weakness has been in the balance of UK income on investment, as UK investors earn less on foreign assets and foreigners earn more on UK ones. At its simplest, you could think of UK investors being long Bunds, while foreigners were long UK gilts (which yield more) or property (even more).”

“So far, foreign investment inflows have insulated sterling from any effect. That will remain the case for now, but in a Haldanian world of negative rates, or in Brexit, all that could change dramatically. We are bearish of sterling (of GB/JPY in particular) not because a much weaker pound is part of our central scenario, but because of a big, fat, ugly tail risk that is much more likely than significant out-performance.”

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