The British Office for National
Statistics (ONS) released its latest figures for UK Gross Domestic Product at
9:30 GMT yesterday. The quarterly figures were worse than hoped for, at 0.5%
growth as against 0.6% expected. Full year growth was 2.7%, while 2.8% had been
expected by the market (Data analyst agencies poll a number of economists in
order to find out what is expected).
The initial market reaction was typical.
Lower GDP than the consensus estimate, therefore the pound sterling (GDPUSD),
otherwise known as Cable, must be marked down. And it was, for a while. Our
Mandelbrot algorithmic took on a short trade (expecting the rate to continue
down) when it saw the way the rate was going, and for about an hour after that
this looked like a good decision.
Then some of the larger market
participants, the ones that move the market, seem to have noticed that while quarterly
figures were down and while the year-on-year figure was lower than the
consensus estimate, that number was actually higher than for last year, which
was 2.6%. The British economy might not be so bad after all (and it is not.
This figure makes annual growth as high as it has been for seven years). Add to
that the fact that Sterling was somewhat beaten down since last week’s
shenanigans around the Euro, and the exchange rate was ripe to go in the other
direction. Which it did.
But
the Mandelbrot algorithmic routine is ready
Mandelbrot abandoned its short
position (which expected the rate to fall) for a small loss and took up another
one which harmonised with the newly prevailing sentiment to the upside. The end
result was a net gain for the day for this pair.
What is of abiding interest is the
trajectory of the exchange rate on the 10-minute chart above, in the time prior
to the rise after the short trade was placed. The 200 period Exponential Moving
Average (EMA) acted as an almost impenetrable barrier to any fall below it.
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