Preliminary GDP readings have shown that growth in the UK slowed during the third quarter of 2014, as growth was impeded by weakness in Europe. However, the numbers were in line with market estimates which has resulted in a positive reaction for Sterling against the majors. It will be interesting to see if today’s data assists BoE policymakers in bringing forward their expectations for a rate rise.The GfK survey released earlier today provided further evidence that macro challenges in Germany are subsiding after yesterday’s manufacturing PMI reading surprisingly improved. Across the Atlantic, new home sales numbers will be eyed later today to determine housing market conditions in the United States.
Today’s UK retail sales data has disappointed investors, putting further pressure on the Pound against the US Dollar. A slower pace of growth in retail sales for September has raised doubts about the prospects for the economy going forward. Yesterday’s minutes from the BoE’s recent policy meeting had also weakened expectations of an early interest rate rise in the UK. However, tomorrow’s GDP report will be crucial in helping investors to reassess their view on the UK’s macroeconomic health and the future course of the monetary policy in the UK.Across Europe, data showed that the pace of manufacturing sector activity in Germany rebounded unexpectedly during October, suggesting that difficult conditions in the economy are fading away.
Although the scale of revival in the labour market continues to bode well for the UK and the US, sluggish consumer price inflation remains a key area of concern for both economies. Against this backdrop, today’s US inflation numbers will be closely eyed to ascertain whether both economies continue hand in hand with regards to inflation, especially after last week’s disappointing UK inflation data. Meanwhile, the minutes of the latest BoE policy meeting released today revealed that two MPC members continued to vote for an immediate rise in the nation’s interest rate.Yesterday, the Euro came under pressure against the majors following media reports indicating that the ECB might consider purchasing corporate bonds in the near future.