Eurozone economy in the Spotlight Today
The Eurozone’s third quarter revised gross domestic product (GDP) is up for release today. Meanwhile, German factory orders registered a strong rebound for October.
In the UK data docket, a report by the British Retail Consortium (BRC) showed that British retail sales slowed in November from October. Also, the UK Supreme Court hearing on the government’s Brexit appeal continues today. In the US, trade balance, IBD/TIPP economic optimism index and durable goods orders data will take centre stage later in the day.
Pound Sterling – UK Markets
The Pound is trading on a stronger footing against its major peers this morning. The UK Supreme Court hearings concerning the government's ability to trigger Article 50 without scrutiny of the Parliament continues today. The hearings are scheduled to last for a few days and a decision is not expected until next year. Data-wise, latest figures from the BRC showed that British retail sales slowed in November after a bountiful October, as consumers waited for Black Friday bargains to make purchases.
Sterling ended higher against the greenback in yesterday’s session, thanks to the closely watched UK services PMI reading which posted an unexpected rise for November. British service sector firms enjoyed the fastest growth in activity since January this year, as they continued to recover from a short downturn following the Brexit vote. Moreover, the index has now managed to stay above the 50-mark threshold for four months running. Separately, the Bank of England Governor, Mark Carney, in a speech at Liverpool, called for a balanced mix of monetary, fiscal and structural policies to promote inclusive growth.
US Dollar – US Markets
The US Dollar is trading lower against the shared currency and Pound this morning, ahead of a series of economic releases in the US scheduled today. To begin with, traders will witness US trade balance, which is likely to post a larger deficit in October. Further, the nation’s final print of durable goods orders and the IBD/TIPP economic optimism index are also up for release.
Yesterday, data indicated that the US ISM non-manufacturing PMI blew past expectations in November. The index marked its quickest pace of growth since October 2015, amid an increase in production, hiring and new export orders. Further, the final print for Markit services PMI was unexpectedly revised lower in November. Meanwhile, Federal Reserve (Fed) officials, William Dudley and Charles Evans, supported prospects for higher interest rate as the US economy continues to show improvement. However, the St. Louis Fed President, James Bullard, stated that the economy will require only one rate increase through 2019 to reach a neutral rate, given that inflation and unemployment are close to Fed’s target.
Euro – European Markets
This morning, the Euro is trading mixed against the greenback and the Pound. Data released earlier in the session showed that Germany’s seasonally adjusted industry orders topped market expectations and surged to over a 2-year high in October, mainly led by a higher demand for cars and vehicle parts. Ahead in the session, the Eurozone’s final reading of GDP data for 3Q 2016 will be in focus.
Yesterday, the shared currency went on a roller coaster ride against its American peer. It hit a 20-month low against the US Dollar and still managed to bounce back, as the referendum result was already priced in by investors. The oscillation in the Euro was spurred by the repercussions of Italian Prime Minister Matteo Renzi’s resignation and political risks associated with the same in the nation and the Eurozone as a whole. Separately, the Eurozone’s retail sales posted its biggest growth in two years for October, largely driven by purchases of non-food items in the country. Meanwhile, the region’s investor confidence unexpectedly dropped in December.
Other Currencies – Highlights
The Australian Dollar is trading on the backfoot against the greenback this morning, after the Reserve Bank of Australia (RBA) opted to leave the official cash rate at a record low 1.50%, even though market participants had overwhelmingly expected the result. The central bank believes that steady policy settings remain consistent with its growth and inflation target. The RBA’s accompanying rate statement was little changed from what was issued last month. The central bank statement highlighted a mixed economy and expressed caution about Australia’s labour, growth and inflation rate. It also reiterated that strength in the domestic currency could complicate its inflation mandate in future.
On the data front, figures from the Australia Bureau of Statistics showed that Australia's current account deficit sharply narrowed during the third quarter, dropping to a 2-year low level. It was largely driven by a sudden turnaround in key commodity markets. Going ahead, all eyes will be on Australia’s third quarter gross domestic product report, due tomorrow. It is expected to show that the Australian economy weakened during the period.