Post-Brexit Britain has not plunged into recession after all.
Today is an extremely important day in the UK. The Office for National Statistics just unveiled the official growth figures for the third quarter, and they make for great reading, with preliminary gross domestic product (GDP) figures surpassing expectations. This is the first indication of how the UK economy is performing in the aftermath of the Brexit vote, and going by this data, the British economy is doing quite well.
The day has started on a pleasant note in the Eurozone too, as the Spanish unemployment rate dropped to its lowest level since 2009 during the third quarter of this year. Across the Atlantic, the US data docket will witness the release of durable goods orders, pending home sales and the weekly jobless claims data, all due later in the day.
Pound Sterling – UK Markets
The Pound had initially spiked against the US Dollar this morning, after the data showed that UK’s GDP blew past market expectations during the third quarter. However, it surrendered part of its gains as the third quarter growth was slower compared to the earlier quarter. After the data was released, Brits rejoiced at the fact that the UK did not plunge into recession, as widely feared. The British economy has actually registered growth for the 15th consecutive quarter. Looking ahead, UK’s CBI distributive trades survey is up for release, which is an indicator of short term trends in the nation’s retail and wholesale sector. Although the September data was pessimistic, it’s expected to post an improvement for October.
Yesterday, Sterling managed to recover and regained lost ground against the US Dollar and the shared currency. However, the domestic currency continued to remain choppy throughout the day. On the data front, a report by the British Bankers' Association showed that UK’s mortgage approvals rose to a
3-month high level in September.
US Dollar – US Markets
The greenback is trading mixed against its major peers this morning. Market participants will be watching US durable goods orders, weekly initial jobless claims, pending home sales and Kansas Fed manufacturing activity data later today. Looking further ahead, they’ll keep a close eye on the flash US third quarter gross domestic product data, which is due to release tomorrow.
The US Dollar weakened against the Pound and the Euro yesterday. On the data front, activity in the US services sector surprisingly advanced in October, boosting optimism over the health of the nation’s economy and strengthening the case for an interest rate increase by the US Fed in December. In other economic news, the nation’s new home sales registered an unexpected increase in September, hovering at its highest level in almost 9 years, indicating sustained momentum in the nation’s housing market. Advance goods trade deficit in the US narrowed in September and MBA mortgage applications declined during the last week.
Euro – European Markets
The shared currency has managed to carry forward its upward momentum against the US Dollar this morning, pushing ahead for the third consecutive session. Data out earlier in the session showed that the Spanish unemployment rate declined more than expected during the third quarter of this year. As per the report released by the country’s statistics agency – The Ministry of Labour and Immigration – it’s at its lowest level since 2009. This is welcome news for Head of the Conservative Popular Party, Mariano Rajoy, who is the current acting Prime Minister of Spain, as this virtually guarantees him to win Parliament's approval this week to form a minority government and end a 10-month political deadlock. In other economic news, Italian business confidence surprisingly advanced in October.
Yesterday, a forward-looking consumer sentiment index by the market research group GfK indicated that German consumer confidence is set to hit a 7-month low in November, as weak global growth is expected to adversely affect the nation’s domestic activity.
Other Currencies – Highlights
The Kiwi Dollar had fought back control against the greenback this morning, cruising into positive territory, despite the release of dismal trade figures in New Zealand. However, it pulled back after some time. Having maintained a lull for most of this week, the New Zealand economic calendar witnessed its first release earlier in the session. The latest New Zealand trade statistics confirmed that the country continues to run a notable deficit in its trade balance. The nation’s trade deficit widened to a record high in September, mainly led by a steep decline in meat exports, which dropped to the lowest level in over 3 years. On the other hand, the nation’s imports advanced, boosted by a sharp increase in aircraft imports.
Looking ahead, New Zealand will see a string of economic releases next week, in contrast to the current week’s activity. Some of the crucial data-points will include the nation’s building permits, the Global Dairy Trade price index and third quarter unemployment rate data.