Britain’s Economic Recovery Decelerates
The preliminary UK GDP data this morning showed that economic growth expanded at a slower than expected pace for the last quarter of 2014. Consequently investors’ expectations of an early interest rate rise in the UK have diminished. Separately, another survey showed that the number of mortgage approvals for December continued to ease for a sixth straight month.
Across the Atlantic, a slew of crucial economic updates will keep investors on their toes today. December’s durable goods orders report will be eyed to gain an early insight into Friday’s preliminary US GDP data for the fourth quarter. Additionally, the US consumer confidence survey for January will attract considerable attention among investors.
Pound Sterling – UK Markets
Preliminary GDP data released this morning has shown that economic growth in the UK registered a lower than expected reading for the fourth quarter of 2014, in line with the NIESR’s GDP forecast released earlier this month. Today’s data has strengthened concerns that Britain’s macro recovery is losing pace, especially amid a slowdown in key European nations. Despite the disappointment, the Pound remained supported against the greenback. Going forward, traders will eye the revised UK GDP readings for the last quarter to better gauge the nation’s economic trend, particularly considering that the first estimate covers only about 40% of the economy's quarterly output. Separately, another report revealed that the number of mortgage approvals in the UK eased for December.
Yesterday, the Pound gained ground against the greenback and rose above the 1.50 level. A BoE Monetary Policy Committee member, Kristin Forbes, stated that prospects remain strong that UK’s inflation will continue to fall for the next few quarters before witnessing a rebound. She further hinted that the central bank must consider raising interest rates sooner than market expectations.
US Dollar – US Markets
Ahead of crucial US economic updates today, the greenback is trading on a weaker footing against the Pound this morning. Today’s US durable goods orders report for December will attract considerable attention among market participants to help them gauge the economy’s health for the final quarter of 2014 before Friday’s preliminary GDP reading in the nation. Separately, investors will eye the Conference Board’s survey later today which is anticipated to show an improvement in consumer morale for January, especially considering the nation’s robust pace of labour market growth of late. Moving ahead, investors will keep a tab on the US Fed’s policy meeting tomorrow, where the post meeting statement will be keenly scrutinised to gauge the timing of an interest rate rise in the nation.
The greenback lost ground against the Pound yesterday. In a noteworthy development, the Congressional Budget Office indicated that the US Federal budget deficit is projected to decrease over the coming three years, but increase after 2018 as the gap between public spending and revenues is projected to grow thereafter.
Euro – European Markets
The Euro gained ground against the greenback yesterday and rose above the 1.12 mark. Yesterday’s Ifo survey showed that confidence among German firms improved for January, amid expectations that a cheaper Euro will keep the nation’s export growth supported going forward. However, the Ifo report’s expectations component remained weaker than expected as uncertainty continues to mount over the full impact of low oil prices on the global economy and as firms expressed caution following the recent developments in Greece.
With little on the domestic macroeconomic front today, the Euro is trading in a tight range against the greenback this morning. Going forward, traders will keep a tab on tomorrow’s GfK survey in Germany, to gauge if morale among consumers continued to improve for February, given the recent encouraging ZEW and Ifo reports indicating that the overall macro health in the nation is improving. Additionally, amid signs of an upside in this month’s consumer optimism, Euro investors will eye the preliminary consumer price inflation reading in Germany scheduled later this week for further direction.
Other Currencies – Highlights
Being closely correlated with oil prices, the Canadian Dollar pared its early session gains against the greenback yesterday, tracking a drop in crude oil prices. In light of Friday’s report which showed a more than expected drop in the nation’s consumer price inflation for December, the Canadian Dollar continued to remain under pressure, causing the US Dollar-Canadian Dollar pair to remain buoyed above the 1.24 mark. The report further revealed that the core measure of Canada’s inflation rose less than expected for December, strengthening concerns of a more broad based impact of low energy prices.
In the absence of any important macro triggers in Canada today, the Canadian Dollar is likely to take further direction from consumer confidence and durable goods orders data scheduled in the US today. Going forward, traders will eye Canada’s GDP report later this week which is anticipated to show that the country’s economic growth remained flat for November, strengthening concerns over impact of low oil prices on Canada’s macro health.