UK GDP Preview: A drop of more than 2.5% will probably weigh on sterling

First-quarter growth figures for the UK are set to show the worst quarter since the financial crisis. Surpassing the 2008-2009 crisis levels already in Q1 could add pressure to the pound, FXStreet’s analyst Yohay Elam reports.

Key quotes

“GDP figures for both March and the full first quarter – which carries estimates of -2% – will provide initial answers and also serve as a benchmark going forward.”

“A wide range of -1.6% to -2.4% can be considered within estimates. In this scenario, GBP/USD will likely trade choppily but remain within known ranges. Investors will return to focusing on lockdown-related topics.”

“A quarterly contraction of -2.5% or worse would already trigger headlines screaming ‘worst than the crisis’ alongside ‘this is only the beginning.’ Such depressing figures early on could send sterling tumbling down.”

“A slide of -1.5% or less may provide hope that the damage from the virus – while only at its beginning – could be more moderate than projected. In this case, the pound could advance.”