In its third quarter update released overnight, the British Chamber of Commerce hiked its UK economic growth forecast for this year to 3.2% from the previous estimate of a 3.1% growth. However, it lowered export growth forecasts for the next two years and warned that it might impact long-term growth unless policymakers do more to promote a balance.
The Euro nudged higher against the majors yesterday amid speculation that the ECB might not resort to further stimulus measures in its policy meeting scheduled next week unless this month’s inflation report signals that the region is moving closer to deflation. Across the Atlantic, markets will closely watch today’s revised GDP data for further direction.
Pound Sterling – UK Markets
The BCC, in its third quarter update, has hiked its UK economic growth forecast for this year and expects the economy to expand by 3.2% instead of 3.1% estimated earlier, mainly due to an improvement in the domestic labour market and expectations of a faster growth during the second half of this year. However, the business lobby group lowered its growth expectations for the nation’s exports for 2014 and the next two years and warned that disappointing exports might impact the nation’s long-term growth unless BoE policymakers do more to boost balance growth in the country. Meanwhile, in the absence of major domestic macro triggers today, markets will keep a close watch on UK Hometrack house prices data, along with the GfK consumer confidence report to be released overnight, for further direction to risk appetite.
The Pound pared its early session gains against the single currency in yesterday’s trading session after media reports indicated that the ECB might not announce further stimulus measures in its monetary policy meeting scheduled next week unless the Euro zone inflation data for August heighten concerns about potential deflation in the region.
US Dollar – US Markets
The greenback has continued to trade under pressure against its major counterparts this morning. A report from the US Congressional Budget Office (CBO) showed that US budget deficit for the current fiscal year might slip to the lowest level since 2007. The figures from the CBO reaffirms the improving state of affairs on the fiscal front. Meanwhile, markets will keep an eye on today’s revised GDP estimate for the second quarter for confirmation of the overall exuberance seen during the second quarter, especially after the CBO sharply lowered its 2014 GDP forecast on the US economy. Additionally, the first time unemployment beneficiaries in the US is anticipated to show a slight rise for the previous week. With claimants for unemployment benefits hovering close to multi-year lows, it remains to be seen whether the non-farm payrolls report scheduled next week also reflects similar buoyancy in the labour market.
The US Dollar lost ground against the Euro yesterday following hawkish comments from the German Finance Minister. The German consumer price inflation report for August will be an important economic release today to provide further direction to the Euro-US Dollar pair.
Euro – European Markets
The Euro is trading on a firmer footing and above the 1.32 mark against the greenback today following hawkish comments from the German Finance Minister, Wolfgang Schauble. He stated that markets might have misinterpreted recent comments from the ECB Chief as being overly dovish. Meanwhile, data just released showed that the number of unemployed people in Germany unexpectedly rose for August, while the unemployment rate remained steady for the seventh consecutive month. The preliminary German inflation reading is scheduled later today which is expected to remain steady for August, however, an easing inflation trend could stoke concerns among investors.
Additionally, sentiment indices due later today to gauge confidence among businesses and consumers in the Euro zone are anticipated to show a decline for August, as tensions in Ukraine continued to weigh on the region’s economic outlook. Furthermore, renewed signs of tensions in Eastern Europe along with prospects of a halt in the Russian energy supply to the Euro zone in the upcoming winter could limit near term upside in the Euro against the majors.
Other Currencies – Highlights
The Aussie Dollar gained ground against the greenback in today’s trading session following the release of upbeat Australian private sector capital expenditure data. Capital expenditure of non-government owned firms rebounded unexpectedly for the second quarter, strengthening hopes of a pick-up in the Australian economy. However, another report showed that new home sales in Australia declined for July. Markets will keep a tab on tomorrow’s private sector credit data which is expected to show a marginal slowdown in growth for July. Meanwhile, the minutes of the central bank’s latest policy meeting along with GDP data for the second quarter will be some crucial economic releases in Australia scheduled next week.
The Australian Dollar is likely to remain supported against the greenback, especially after the Congressional Budget Office downgraded US GDP growth forecast for 2014. Markets will keep a tab on today’s revised GDP estimate for the second quarter and tomorrow’s Reuters/Michigan consumer sentiment survey in the US for further direction to risk appetite.
Political Jitters in UK Weighs on Pound Sterling
Euro and Pound Sterling Recover Modestly on Friday
The US Dollar Rallies on Upbeat Data and Hawkish Fed Stance