All eyes on UK GDP at 9 30am

All eyes are fixated on the reading of UK GDP for the first quarter of 2013 this morning. The data is released at 9.30am London and will likely impact multiple markets such as the pound sterling, the FTSE 100, UK banks and retailers.

The market is expecting UK GDP to show minimal growth of 0.1% after contracting by 0.3% in the previous quarter. Another contraction would mean that the UK has entered into a Triple-Dip recession.

It must of course be said that this is a preliminary reading and historically, preliminary GDP readings have proved highly volatile and subject to revisions in the second or final readings. Therefore, today’s data should be taken with a pinch of salt.

Today’s data does however come on the back of a raft of weak UK data and a further UK credit ratings downgrade from the ratings agency Fitch just last week, applying even more pressure on the coalition government to speed the UK’s anaemic recovery.

The GDP reading is likely to prove pivotal on whether the Bank of England’s MPC can be convinced to increase the current levels of quantitative easing. Currently, just three members of the committee including the Governor Mervyn King have voted on consecutive occasions to increase QE by £25bn. So in this sense, with the MPC wavering and looking for further evidence that QE is warranted against a backdrop of rising inflation (which stands at 2.8%), this GDP reading will play a strong role in how the MPC next votes on the question of more QE.

A contraction today would likely apply pressure on the pound sterling as a double negative of weaker than expected UK growth and heightened expectations of more QE.

Keep an eye on my Twitter account (@Josh_Cityindex) for live updates on the GDP.

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