GDP Rises on Month, Dips on QuarterThe latest UK GDP data this morning paints a bleak picture ahead of the BOE meeting on Thursday. At first glance, the 0.5% rise in October looks promising, marking an uptick from the prior month’s -0.6% reading and a beat on the 0.3% the market was looking for. However, the 3 months output reading, from August through October, was seen contracting 0.3%, suggesting the UK is still heading into recession.UK Recession RisksThe BOE governor himself warned last time around that the UK is likely at the start of a two-year recession. This week, traders are wary of hawkish risks for the BOE given that inflation remained at four decade highs last month and is showing little sign of cooling. Additionally, while a hike of between .5% and .75% is expected, the BOE is also expected to double down on the gloomy warnings issued last time around meaning that Thursday will likely be particularly volatile for GBP and UK assets.BOE Division GrowingHowever, given the particular severity of the risks facing the UK economy, which many cite as the worst since the 1970s, risks of greater division among BOE members is rising. Indeed, with many concerned about stagflation in the UK, a potential four-way split (first time ever) is one outcome being touted ahead of the meeting. The split would essentially consist of votes in favour of a hike, a larger hike, a smaller hike and no change. Such an outcome would no doubt fuel an uptick in investor uncertainty, hitting UK asset prices. For now, GBP continues to rally ahead of the event with investors seemingly more focused on upside risks to rates.Technical ViewsGBPUSDThe pair continues to grind higher here within the bullish channel which has framed the recovery off the lows. Price is currently testing the 1.2195 level resistance. If price can hold above here, focus will turn to a test of the 1.2695 level next. Starting to see some bearish divergence creeping in, highlighting reversal risks. Any sudden drop below 1.2195 will turn focus to a test of the channel lows and the 1.1474 level next.
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