EC Slashes UK Growth Forecasts
The European Commission (EC) slashed its GDP growth forecast for the UK to 1.5% for 2017, 0.3% less than the previous estimate. The EC predicts that the British GDP will grow by 1.3% in 2018 and 1.1% in 2019. According to the EC’s statement, Brexit uncertainty and its impact on businesses are the main reasons for the downward revision. The European Union (EU) has urged British negotiators to propose an improved plan on settling financial matters by the end of November. Theresa May is facing internal government troubles after Priti Patel was sacked, with her Tory rivals expecting her to turn things around by December.
Donald Trump commented on the US trade deficit with China, saying that the Chinese have got away with unfair trade practices. Trump, who is visiting Beijing to sign deals worth $250bn, didn’t neglect to blame previous US presidents for tolerating those trade practices. In the Eurozone, the EC raised the economic growth forecast for 2017 from 1.7% to 2.2%. According to data published, Germany’s trade surplus widened even more in September.
Pound Sterling – UK Markets
Today, the Pound continued its drop against the US Dollar and the Euro for a second day with the exchange rates set at $1.31 and €1.13, respectively. A fresh round of negotiations with the EU starts today. Theresa May is being pressed to make concessions to the EU, while a new crisis in her government is threatening her ability to rule.
According to a Financial Times article, EU negotiators have urged their British counterparts to make sufficient progress on financial issues by the end of November. The EU side warned that if the UK doesn’t make a significant offer in the next three weeks, the bloc’s leaders may not be able to discuss a transitional deal in December’s EU summit. For Businesses, the clock is already ticking, as they want to prepare contingency plans in case Brexit negotiations fail. If the UK and the EU manage to agree on financial matters, the EU Council could adopt some basic guidelines for a future transition deal that would reassure businesses about their future.
The Royal Institution of Chartered Surveyors (RICS) published its October’s House Price Balance survey. The survey showed that house sales fell, as fewer people were willing to buy or sell a home. The majority of the surveyors said that prices are going to fall further over the next three months, especially in the area of London and in South Britain. RICS’ analysts said that last week’s interest rate hike appeared to contribute to the prices’ drop.
US Dollar – US Markets
The US Dollar inched lower against the Euro with the exchange rate set at €0.86. The US Dollar Index (DXY) lost a bit of ground coming in at 94.80. Uncertainty around the proposed tax reform bill prevented the US currency from gaining value.
President Donald Trump delivered a speech in Beijing during which he said that China took advantage of the US regarding the trade balance between the two countries. Standing right next to the Chinese President Xi Jinping, Trump accused the Chinese administration for getting away with unfair trade practices and serving its citizens’ interests. The US President blamed previous US leaderships “for allowing this out-of-control trade deficit to take place and grow.”
Media reports suggested that the Senate won’t release its version of the proposed tax bill on Thursday as it was expected. According to analysts, the delay is a sign that the procedure of writing the new tax bill is challenging, although it is possible that the Senate won’t release its version until the House Ways and Means committee finish marking up theirs. Media sources said that the senators will receive information on the bill before they leave for the weekend.
Euro – European Markets
The Euro inched higher against the US Dollar with the exchange rate set at $1.16. The European Commission (EC) published its forecast for the bloc’s GDP growth rate in the next years. Germany was once again in the spotlight with a series of positive data coming from its economy.
Germany’s trade surplus widened in September coming in at €21.8bn, surpassing market expectations. German exports were reduced by only 0.4%, instead of the anticipated -1.1% reading. The volume of imported products was reduced by 1.0%, on a monthly basis while analysts had expected that it would increase by 0.3%. The German current account surplus also increased in September more than it was expected.
The EC raised the Eurozone’s economic growth forecast for 2017 from 1.7% to 2.2%, which is the fastest pace in the last decade. It also raised the forecast for the European Union as a whole from 1.9% for this year to 2.3%. The European Central Bank (ECB) published its monthly bulletin noting that latest data indicate an unabated growth momentum in the second half of the year. The ECB mentions that downside risks continue to relate to global factors and developments in forex markets.
Other Currencies – Highlights
Sterling dropped against the Australian Dollar, trading at 1.70 AUD. According to Business Insider information, Amazon will launch its Amazon Australia online platform by Christmas time. The retail giant used the Amazon.com.au website so far as a shopfront for its book-selling activities. On Monday, 500 Australian merchants will take part in a meeting, in which Amazon’s officials will show them how exactly the platform will operate.
The Pound lost ground against the New Zealand Dollar, trading at 1.88 NZD. The Reserve Bank of New Zealand (RBNZ) board decided to keep interest rates on hold at 1.75%. The RBNZ’s monetary policy statement said that policy will remain accommodative for a considerable period, while it predicted a slightly earlier start for interest rate rises during 2019.
Sterling fell against the Swiss Franc, trading at 1.31 CHF. Switzerland’s unemployment rate in October remained stable at 3.1%, in line with market expectations.