Euro zone Q3 GDP and US Retail Sales Report Today
The just released official figures of the UK’s construction sector indicated that construction output in September unexpectedly fell for the third straight month. The disappointing data appears to be in line with the preliminary third quarter Britain’s GDP data published last month which had attributed the slowdown of the UK economy in the third quarter of 2015 to construction output growth which slumped the most in three years.
In Europe, preliminary Q3 GDP figures revealed that the German economic growth moderated on weak investment and export trade, while the French economy was buoyed by domestic demand. Growth figure for the Euro zone as a whole in the third quarter will roll out in a short while. Later today, the US retail sales report could nudge the Fed one step closer to raise its benchmark interest rate.
Pound Sterling – UK Markets
The last UK data of the week, which was published right now, showed that construction output unexpectedly contracted for September though at a slower rate than in the previous month. On an annual basis, the drop was the largest in over two years. Based on today’s update, it is likely that the construction industry, which makes up UK’s 6% of GDP, acted as a drag on Britain’s economic growth at the end of the third quarter. The figures confirm the estimates of the third quarter growth data print, released last month, that growth in UK’s construction sector slowed the most since 2012 and played the part in slowing economic activity in the three month period. However, the Pound hardly moved against the US Dollar, following this data release.
Amid no other UK macroeconomic indicators due in the session ahead, market participants will gradually shift their focus to next week’s domestic economic data releases. UK’s October consumer price inflation print is scheduled early next week and if the CPI index falls deeper into the negative territory, the MPC’s forecasts of long term low inflationary pressures will be proven right.
US Dollar – US Markets
This morning, the US Dollar has pared some of its earlier losses against the common currency which were triggered after comments by key Fed officials signalled a gradual tightening following a likely December interest rate rise. Meanwhile, investors are likely to be waiting on the sidelines ahead of key October retail sales data scheduled later today. The overall tone of the report could be on the weaker side, with markets anticipating only a modest expansion in spending momentum for October after almost stalling in the previous two months. However, stronger car sales and recovery in gasoline sales could give a boost to today’s retail sales figures. In addition, a strong gain in core retail sales report could push the Fed an inch closer to finally raising its benchmark interest rate, but expectations are for the core sales report to show a subpar growth. Going forward, prospects for consumer spending and retail sales growth are high as the holiday season in the US comes closer.
Also on investors’ tap would be US producer prices data and Michigan University’s consumer confidence report due today.
Euro – European Markets
The Euro – US Dollar currency pair slipped below the 1.08 mark earlier today as currency traders digested third quarter growth figures from France and Germany which were among the first of a spate of GDP publications from across the Euro zone today. Economic growth in Germany, Europe’s biggest economy, slowed in the third quarter on the back of weak foreign trade. The dismal GDP print adds to evidence that slowing growth in China has weighed on the export-oriented Germany. At the same time, consumer spending was among the key drivers of German economic growth in light of a tight labour market and higher job prospects. Meanwhile, in some positive news, the French economy returned to growth in the three months to September as falling energy prices and weak borrowing costs boosted the households’ disposable income and encouraged businesses to invest in the Euro zone’s second largest economy.
In a short while, growth figures for the Euro zone are scheduled and expectations are that growth in the wider economy remained steady for the third quarter, thus favouring the ECB to expand its QE.
Other Currencies – Highlights
Mixed economic data that was released earlier today in Japan was hardly influential to trading in the US Dollar – Japanese Yen currency pair. Japan’s service industry brought in disappointing news as the sector contracted in September from an upwardly revised gain in the prior month. The fall in the service sector activity growth index was for the first time since May. However, on the contrary, output in Japan’s industrial sector expanded slightly more than initial estimates for September. In addition, capacity utilization in Japan’s manufacturing sector for September climbed to record its best reading since January this year, indicating less machinery was left idle during the month.
Currently, the US Dollar has regained some ground against the Japanese Yen ahead of key US economic releases in the session ahead. A stronger than expected US economic data will keep the hopes of a December rate rise firmly back on the table and could trigger an upside rally in the currency pair. In the coming weekend, first time estimate of Q3 annualised GDP data in Japan will draw significant market interest.