All Eyes on the First Print of US Q3 GDP Today
Today is a very busy day across the globe, with lots of economic data-points from different countries being released. The US economy is set to command the most attention today because the preliminary reading of the nation’s third quarter gross domestic product (GDP) is due. Economic growth is likely to have accelerated during the period, as consumers continued to maintain a strong pace of spending. Apart from this, the US core personal consumption expenditure and the Reuters/Michigan consumer sentiment index will also be on investors’ radars.
In the UK, data showed that consumer confidence fell in October. Across the English Channel, French economy rebounded less than anticipated, whereas Spain surprisingly logged another robust growth during the third quarter.
Pound Sterling – UK Markets
The Pound is trading mixed against its major peers this morning. Data released earlier showed that UK’s GfK consumer confidence index, which provides an assessment of respondents’ outlooks for the next 12 months, declined further in October as the British grew more anxious about the country’s economic prospects over the coming months. Looking ahead, the British economic calendar is jam-packed with data next week. Although the Bank of England’s interest rate decision will be the key risk event, a string of economic data-points is also up for release and is guaranteed to attract attention. This includes the UK’s consumer credit, mortgage approvals, BRC shop price index and manufacturing and services PMI data.
Yesterday was a bitter-sweet moment for Sterling. In a perplexing move, the Pound gained temporary ground against the greenback after the publication of UK’s GDP report, which showed that the British economy grew faster than expected in the third quarter. However, it could not sustain its upward momentum as third quarter growth had slowed compared to the previous quarter.
US Dollar – US Markets
The greenback strengthened against its major counterparts yesterday. On the data front, US durable goods orders surprisingly declined in September by the most in 7 months, amid weak demand for computers and electronic products. This has increased uncertainty over an interest rate rise by the US Federal Reserve before the end of this year. In contrast, US pending home sales advanced more than expected in September, boosting optimism over the health of the nation’s housing sector. Further, the number of Americans who filed for fresh unemployment benefits fell last week, remaining almost at its lowest level in 4 decades, indicating that the labour market continues to expand. Meanwhile, the US Kansas City Fed manufacturing activity index remained steady in October.
The US Dollar is trading lower against the Pound and the Euro this morning. Later today, market participants will keep a close eye on the US gross domestic product and personal consumption data, along with the Reuters/Michigan consumer sentiment index, for further cues in the greenback.
Euro – European Markets
The shared currency is trading on a strong footing against the greenback and the Pound this morning. Data released earlier in the session showed that the French economy rebounded less than expected during the third quarter of this year, amid a prolonged weakness in the nation’s consumer spending and declining business investment. Also, an increase in energy prices was offset by a drop in food and services prices. Spanish GDP expanded in line with investor expectations in 3Q 2016, despite the country being stuck in a political deadlock. Spain has been stuck with a caretaker government since January this year, with two general elections failing to deliver a clear winner.
Separately, the European Central Bank's Executive Board Member, Benoit Coeure, asked the government to participate in shouldering the burden of reviving the Eurozone economy. He stated that the central bank has very little room to manoeuvre as its interest rate policy approaches the effective limit. Going ahead, the Euro area’s consumer confidence index and German consumer price index (CPI) data are awaited.
Other Currencies – Highlights
The Japanese Yen is trading higher against the US Dollar this morning, amid a broad-based weakness in the greenback. A slew of economic releases released earlier in the session painted a gloomy picture of Japan’s economy. Japan’s consumer prices declined for the seventh straight month in September, in a fresh blow to the efforts of Prime Minister, Shinzo Abe, and the Bank of Japan (BoJ) Governor, Haruhiko Kuroda, to revive the nation’s economy. Core consumer prices, that excludes volatile energy, and food prices also registered a drop, making the BoJ’s 2.0% inflation target look like a far-fetched dream. This disappointing data comes as the world’s third largest economy struggles to kick-start growth and conquer a long battle against deflation. In some good news, Japan’s unemployment rate surprisingly slipped to 3.0% in September, the lowest since 1995.
The BoJ is scheduled to hold its monetary policy meeting next week, and the policy board members are expected to revise their inflation outlook. They have been trying for more than 3 years to reach that goal, but in vain.