Latest UK GDP data beats expectations
This week ends on a busy note. In the UK, the just released data showed that final reading of the nation’s gross domestic product (GDP) rose more than expected during the second quarter of this year.
German retail sales dropped in August. Investors look forward to the Eurozone’s consumer price index (CPI) data later today. And in the US, market participants await personal spending and consumer sentiment data, as well as a report on manufacturing activity in the Chicago area, for further indications on the strength of the economy.
Pound Sterling – UK Markets
The Pound is trading higher against the US Dollar and Euro this morning, after the just out data showed that the final reading of UK’s second quarter GDP rose above expectations by 0.7%, as consumer spending and business investment increased. A separate report by mortgage lender Nationwide showed that British house price growth registered a slower increase in September as compared to the rise in August.
Yesterday, Sterling ended lower against its major peers. On the data front, a survey by market research firm GfK indicated that British consumer morale has jumped back to pre-Brexit levels, after recording its sharpest drop in over 26 years in July. This suggests that the vote to leave the EU will not wreak havoc on British spending habits after all. Further, the Lloyds business barometer, another highly-watched indicator of how the UK economy is performing, showed that the net balance for economic optimism climbed in September.
US Dollar – US Markets
The US Dollar is trading mixed against the Pound and the shared currency this morning. The US Reuters/Michigan consumer sentiment index, personal spending, income data and the Chicago purchasing managers' index will all attract significant market attention when they are released later today.
The greenback strengthened against the major peers yesterday after the US economy expanded more than expected in the second quarter, on the back of improved business investment, providing a strong base for third-quarter economic growth. In other economic news, the number of Americans filing for initial jobless benefits advanced less than forecasted during the last week, indicating a steady improvement in the nation’s labour market and supporting expectations for an increase in interest rate by the Fed later this year. Meanwhile, pending home sales slumped in August, notching its lowest level since January - the latest sign that the US housing market has lost momentum in recent months.
Euro – European Markets
The shared currency is trading lower against its major peers this morning, after data showed that German retail sales declined in August. However, on an annual basis, retail sales surpassed expectations in August. The preliminary reading on French consumer prices revealed a slight rise in September, as the price of services increased and the drop in energy prices slowed. And Italy’s unemployment rate held steady at 11.4% in August. Investors now look forward to the Eurozone’s unemployment rate and CPI data, both due out soon.
Yesterday, data indicated that final reading of the Euro region’s consumer confidence index held steady in September. Additionally, the economic sentiment indicator advanced to an 8-month high (from a 5-month low last month), mainly driven by an improvement in industrial and retailers' confidence.
Other Currencies – Highlights
The Japanese Yen is trading weaker against the greenback this morning, falling for the fourth straight session. Japan witnessed a data deluge earlier in the session, which painted a weak picture of the nation’s economy. Japan’s consumer price index (CPI) dropped for the sixth consecutive month in August, underlining the challenges faced by the nation’s government and the Bank of Japan (BoJ), as both recently introduced widespread measures in a bid to hit the 2.0% inflation target. Household spending declined in August too, registering its biggest fall since March this year. Also, Japan’s unemployment rate edged up to 3.1% in August. Separately, housing starts in the nation rose less than anticipated for August.
The only good news for Japan came in the form of industrial production, which registered a larger than expected increase last month. Separately, the BoJ’s September meeting minutes revealed that board officials had a heated debate about the feasibility of overhauling its massive stimulus programme, and were doubtful whether it would enhance flexibility of monetary policy.