By: Andrew Keene
Poorer than expected data released Friday could fuel further selling of the GBP (ETF: FXB), as the UK Office for National Statistics (ONS) reported GDP declined by .3% as opposed the expected .1%. Should further contraction occur in Q1 2013, the UK economy will have the dubious distinction of having officially entered a triple dip recession. A recent revision trimmed 2011 growth by .1% to .7%, compounding an already gloomy economic picture.
Recent remarks by incoming Bank of England Governor Mark Carney fueled pessimism, as he stated his mission to be less to control inflation and more growth focused. Data suggesting an ease in inflation will also pave the way for further quantitative easing by the BOE which recently maintained its at purchase program at 375 B pounds, purchases under which were completed in November.
Finally, Standard and Poors stated last month a 1/3 chance that it will downgrade the UK's credit rating in the 2 years, citing the debt-to-GDP ratio as the causal factor should recovery continue to miss expectations.
My trade:
March 155-152 Put Spread
Risk: $90 per 1 Lot
Reward: $210 per 1 Lot
Breakeven: $154.10