A Quiet Trading Session Ahead
With a light macro calendar in the UK today, investors’ focus is likely to remain on the revised GDP reading scheduled this week. The revision is expected to confirm that Britain’s economic growth for the third quarter remained close to its pre-recession high. However, any downside surprise in the reading is likely to weigh on expectations of a sooner than expected interest rate rise in the UK.
On Friday, the Euro lost significant ground against the majors following dovish comments from the ECB President. However, the German Ifo survey released earlier today showed that domestic business conditions improved for November. Across the Atlantic, the Markit preliminary non-manufacturing PMI report due later today is anticipated to attract market attention for further direction.
Pound Sterling – UK Markets
On Friday, the Pound moved higher against the Euro after the ECB Chief hinted at further stimulus measures, if required, to support the region’s economy. Data released on Friday showed that public sector net borrowing in the UK grew at a slower pace for October. This might have eased some concerns of the British Chancellor, George Osborne, as he plans to cut government borrowings by 10% this fiscal year. Separately, David Miles, a MPC member, stated that it is difficult to provide any clarity over the timing of an interest rate rise in the UK, as unforeseeable developments are likely to impact the nation’s monetary policy going forward.
With a light domestic macro calendar today, Sterling is expected to take direction from macro releases in the US. Later this week, Britain’s revised GDP numbers will be eyed to determine if the pace of economic growth remains close to its pre-recession high for the third quarter. Additionally, this week’s GfK report in the UK will attract considerable attention, as it is expected to show that consumer confidence improved for November despite persistent threat of deflation in the Euro zone.
US Dollar – US Markets
The greenback gained ground against the Euro on Friday after the ECB Chief, Mario Draghi, reiterated that the central bank stands ready to broaden its stimulus programme. Additionally, data released in the US showed that the pace of manufacturing activity in Kansas region improved more than expected for November which further kept the greenback supported against its key peers. Meanwhile, traders will keep a tab on today’s Chicago and Dallas manufacturing activity data which is expected to indicate a slowdown in the pace of activity. Any downside surprise in today’s data might stoke fears among traders that domestic activity is losing momentum as global macro conditions remain subdued. Additionally, traders will keep an eye on the preliminary Markit services PMI report in the US due later today to gauge if the pace of activity in the nation shows any sign of improvement for November.
Meanwhile, the US Dollar is trading in a tight range against its major counterparts this morning. With speeches from central bank officials in the UK and the Euro zone scheduled today, the greenback is likely to witness some volatility against its peers.
Euro – European Markets
The Ifo survey for November released earlier today showed that business climate in Germany improved unexpectedly and firms were optimistic about business conditions in the nation going forward. After last week’s mixed macro data in Germany, today’s upbeat Ifo readings have provided some relief to investors. Going forward, traders will eye tomorrow’s final GDP numbers in Germany to verify if Europe’s largest economy avoided a recession during the third quarter.
In Friday’s trading session, the Euro lost major ground against its key peers and fell below the 1.24 mark against the greenback after dovish comments from the ECB President, Mario Draghi. The central bank Chief indicated that persistent threat of deflation in the Euro zone could trigger the ECB to widen its stimulus programme and start purchasing sovereign bonds. The recent preliminary GDP numbers in Euro zone suggested that the region’s economic growth almost stalled for the third quarter. Against this backdrop, market participants will eye upcoming economic releases to gauge the prospects of further stimulus measures in the common currency bloc.
Other Currencies – Highlights
The Canadian Dollar gained ground against the greenback in Friday’s trading session following the release of upbeat Canadian consumer price inflation report for October. Data showed that annual inflation in the nation rose more than expected last month, despite the recent weakness in global oil prices. An increase in domestic food and shelter costs along with a rise in the prices of natural gas, cigarettes and meat kept the nation’s inflation supported.
Meanwhile, considering the close correlation between the Canadian Dollar and crude oil prices, the crucial OPEC meeting scheduled on Friday is expected to attract considerable market attention. Traders will keep a tab on the outcome of this meeting to ascertain if OPEC members reduce their production amid weak crude oil demand worldwide. Additionally, Canada’s GDP numbers for the third quarter and retail sales data scheduled later this week is expected to prove crucial for the Canadian Dollar against its key peers.