GBP Trades Sideways as Encouraging UK Data Falls Flat

The British Pound has been trading directionless near $1.3500 as encouraging UK economic data was released. According to Brown Brothers Harriman's Elias Haddad, the Q2 and June Gross Domestic Product (GDP) numbers show respectable domestic demand activity.

The GDP rose 0.4% quarter-over-quarter in Q2, matching consensus expectations and slightly above the Bank of England's forecast of 0.3%. The growth was driven mainly by investment and consumption, with government spending being a drag on growth.

The details show that gross fixed capital formation increased by 0.24 percentage points and household consumption rose by 0.16 percentage points in Q2. However, government spending declined, contributing to the decrease in overall growth.

Haddad notes that while these numbers are encouraging, they are unlikely to shift Bank of England rate expectations, with July's Consumer Price Index (CPI) report being a more important factor for policy decisions.