European session review: GBP appreciates after the release of UK's Q4 GDP data

GBP rose against most other major currencies in the European session on Tuesday, supported by better-than-expected UK's Q4 GDP data. 

The Office for National Statistics (ONS) reported its preliminary estimate showed the UK's GDP grew 1.1 percent y/y in the fourth quarter, following an upwardly revised 1.2 percent increase in the third quarter, and compared to economists' forecast for a 0.8 percent advance. In q/q terms, the GDP was unchanged in the fourth quarter, following an upwardly revised 0.5 percent expansion in the previous three-month period and matching economists' expectations. In 2019, the UK's economy expanded by 1.4 percent, compared with 1.3 percent in 2018.

Meanwhile, investors ignored disappointing December data on Britain’s industrial/manufacturing production. UK's industrial production dropped 1.8 percent y/y in December led by a 2.5 percent decrease in manufacturing. In m/m terms, industrial output edged up 0.1 percent and manufacturing was up 0.3 percent. In the 12 months to December 2019, production output fell by 1.3 percent y/y, recording its largest annual fall since 2012, driven by a 1.5 percent decline in manufacturing output.

The latest GDP report reassured investors that the Bank of England (BoE) was unlikely to loosen its monetary policy. At its previous meeting, the UK's central bank hinted it was more interested in seeing if the country's economic growth picked up after the December election.