Pound Lower After Q3 UK GDP Matches Estimates
Today is another light day for economic releases across the globe, though the second estimate of Britain’s third quarter GDP figure published just now is likely to have stirred some market interest. UK’s growth rate for the three months ended September was left unrevised suggesting a moderation in economic growth from the previous quarter. Today’s GDP update has come just two days after the UK Chancellor, in the Autumn Statement, had projected higher economic growth in 2016.
Across the Atlantic, the economic calendar is once again empty as US currency traders are away on an extended break. In Europe, with only little in terms of second tier economic updates, market focus will shift towards next week’s main highlight – the European Central Bank (ECB) monetary policy meeting.
Pound Sterling – UK Markets
The just out second estimate of UK’s third quarter growth data reaffirmed that the economy expanded at a slower pace compared to the previous quarter. The dismal GDP report revealed that trade posed the largest drag on growth in the nation as imports jumped the most in nearly ten years. UK Chancellor, in the Autumn Statement, earlier this week had raised its growth forecasts for the nation for 2016, though he expressed concerns about the UK manufacturing sector which has struggled markedly through this year. A slower growth rate will likely put pressure on the UK government to come up with some more measures to spur growth in the economy. Sterling has extended its descent against the majors following the data release.
Adding to downbeat releases, a survey earlier today indicated that Britain’s consumer morale dipped to its lowest level in six months for November, signalling that UK households are uncertain about the future economic picture. Next week, closely monitored UK PMI prints will provide more insights about the economy’s health as the year comes to an end.
US Dollar – US Markets
The greenback is trading in a tight range against the Euro this morning in thin trading and amid lack of fresh incentives in the US economy. The US markets are having another quiet day after yesterday’s Thanksgiving break but the US Dollar has managed to hold on to some of its gains against some of the major currencies on mounting expectations for a December rate rise by the Federal Reserve (Fed).
In the coming week, investors will probably be on their toes with the all important jobs data in the US scheduled next Friday. This will be the last major data print ahead of the critical December meeting for the Federal Reserve to consider whether to begin monetary policy tightening. Besides this, purchasing managers’ surveys for the manufacturing and services sector, ADP employment change data, jobless claims and factory orders due in the week ahead will also attract noteworthy market attention. Apart from economic data releases, markets will also monitor a number of appearances by the Fed Chairperson Janet Yellen next week. Her remarks will weigh heavily on those anticipating an interest rate rise next month.
Euro – European Markets
The Euro – US Dollar currency pair had a minor upside rally earlier today, but it soon retraced back to previous levels with scarce volatility and thin trading persisting in global markets. Even some economic data released in the Euro land early in the morning failed to influence trading in the shared currency against its key peers. German import prices suffered a bigger than expected decline in October, indicating weak price pressures in the Euro zone’s largest economy. Meanwhile, French producer prices rose again in October following several months of falling prices due to weaker energy and refining prices.
In a short while, investors will turn their attention towards Euro area’s economic sentiment indicator which is anticipated to remain close to the highs seen before the financial crisis. Also, traders will today be awaiting the release of final Euro zone’s consumer confidence numbers and GfK’s report on German consumer climate for some positive news. Heading into the next week, ECB’s economic policy decision is due and markets have almost confirmed additional stimulus offering by the ECB as the central bank struggles to combat deflation and anemic growth.
Other Currencies – Highlights
The Japanese Yen has currently picked up pace against the US Dollar amid an extension of yesterday’s slow trade on the back of low volumes as US currency traders are on a long break. However, the greenback remains broadly supported due to rising expectations that the US Fed will raise its interest rates in the December monetary policy meeting.
In economic news, Japan’s core price inflation rate which excludes the effect of volatile fresh food but includes oil costs fell for the third consecutive month and in line with market estimates for October. The decline in core prices was primarily attributable to the effect of falling energy prices, fuelling doubts about the Bank of Japan’s (BoJ) recent optimistic view that inflation is heading towards its desired target on strong economic recovery. Also, consumers were hardly encouraged by the fall in overall inflation as spending among households unexpectedly fell in October. In the only positive news, Japan’s jobless rate in October dropped to its lowest level in two decades.