After Hammond’s Terrible Autumn Statement, Today It’s Germany’s Day
Although the US markets are closed today for the Thanksgiving Day holiday, it’s a busy day for economic releases in Germany. The November update of the nation’s Ifo business climate index ticked down, while that of current assessment registered a rise. Also, German third quarter GDP confirmed its earlier estimate. Going ahead, investors await German GfK consumer confidence index for December, due in a few hours.
Meanwhile on the other side of the English Channel, UK’s BBA mortgage approvals surpassed market expectations in October.
Pound Sterling – UK Markets
The Pound is trading mixed against the greenback and the Euro this morning. The just out data showed that UK’s BBA mortgage approvals rose more than expected in October.
The Autumn Forecast Statement was the highlight yesterday, as this marked the first budget since the Brexit vote back in June. The Chancellor Philip Hammond’s first and last Autumn Statement, as he announced, revealed the dire state of the British economy following the Brexit referendum. The Office for Budget Responsibility revised downwards its UK growth forecasts for 2017. Hammond also added that Brexit is likely to cost the British government nearly £60.0 billion over the next five years. However, the Autumn Statement did have a silver lining: Mr. Hammond vowed to make the UK the number one destination for business, and introduced investments in green transport, high-speed broadband and scientific research. Further, much to the surprise of members in the House of Commons, the Chancellor scrapped the practice of delivering an Autumn Statement altogether. From 2018, the Budget will be in the Autumn, with only a truncated economic update in the Spring.
US Dollar – US Markets
The greenback reached close to a 14-year high against most of its major peers yesterday, boosted by hawkish Federal Open Market Committee (FOMC) minutes and largely upbeat US economic releases. Data indicated that orders for the long-lasting goods in the US rebounded more than expected in October, rising at their quickest pace in a year. Further, the flash Markit manufacturing PMI surprisingly expanded in November, registering a 13-month high. Additionally, the final print for the Michigan consumer sentiment index was revised higher in November, as investors remained positive about their personal finances and economic growth prospects. Unfortunately, the number of people seeking new jobless benefits advanced slightly last week, although remaining in line with a strong labour market.
The minutes of the November FOMC monetary policy meeting indicated that policymakers believed it would be apt to raise benchmark interest rate relatively soon. Further, some officials opined that rate increase in its December meeting will be needed to preserve the central bank’s credibility.
Euro – European Markets
The shared currency is trading higher against its major peers this morning. A report released by the German statistics office earlier in the session showed that the German third quarter GDP came in confirmation to its earlier estimate. However, it was a far cry from the GDP expansion recorded during the beginning of the year. Foreign trade had a negative effect on the nation’s GDP growth and gross investment experienced only negligible growth during the period. Separately, the Munich-based Ifo economic institute stated that German business confidence remains robust in November, but the outlook for business deteriorated slightly. While the nation’s business climate and business expectations index ticked down, the current assessment index posted an increase. Meanwhile, the Spanish economy grew in line with expectations during the third quarter. Further, French business climate index remained steady in November.
Yesterday, data indicated that Eurozone business activity expanded the most in nearly a year in November, raising hopes that economic momentum is picking up again.
Other Currencies – Highlights
The Kiwi Dollar is trading lower against the greenback this morning, falling for the third consecutive session, amid a broad-based strength in the US Dollar. The ongoing bullishness in the greenback, amid expectations of higher interest rates and inflation in the world’s largest economy, has dented demand for the Kiwi Dollar. Robust US durable goods orders and consumer sentiment data has stoked market sentiment about the US economy and the outlook for US interest rates. The Kiwi Dollar ended lower against the greenback during the entire last week due to concerns about the nation’s businesses and the economy following a natural disaster.
Confidence in the Kiwi Dollar could be bolstered today as New Zealand’s domestic trade data is due later in the day. Exports are likely to have risen moderately in October, thus helping narrow the trade deficit and increasing confidence in the underlying strength of the New Zealand economy. Meanwhile, there is nothing of note in the US today as US markets remain closed on account of Thanksgiving Day Holiday.