Revised UK GDP Estimate in Line With Expectations
The just out revised GDP data confirmed that Britain’s economy expanded in line with preliminary estimates for the second quarter, buoyed by healthy growth in total business investments and private consumption. Moving ahead, Sterling investors will keep a tab on Mark Carney’s statement at the Jackson Hole Symposium tomorrow, to see if the BoE Chief offers any hints about the timing of a rate rise in the UK.
Later today, the preliminary German consumer price inflation reading will offer further direction to the Euro against the majors. Across the Atlantic, personal consumption expenditure data, along with the revised Reuters/Michigan consumer morale survey, will attract attention among market participants in the latter half of the trading session.
Pound Sterling – UK Markets
The just out second reading of UK’s GDP has matched the preliminary figure for the second quarter, with the economy benefitting from the services sector, that makes up around two thirds of the nation’s output. The economy continued to be boosted by upbeat business investment, which registered a rise in the second quarter. Going forward, investors will pay close attention to the BoE Governor, Mark Carney’s speech at the Jackson Hole annual economic symposium in Wyoming. Apart from that, in the coming week, investors will also keep an eye on the Markit PMI numbers, which should provide a fair indication of the performance of the UK economy.
Yesterday, the British Pound gained momentum after the closely followed Gfk consumer sentiment for August unexpectedly rose to a 15-year high, buoyed by optimism among UK citizens about the financial prospects of their economy on the back of a recent rise in wages and low inflation.
US Dollar – US Markets
The greenback gained ground against the majors yesterday following the release of a robust second estimate of GDP. The print showed that economic growth for the second quarter was sharply revised upwards, on the back of solid domestic demand, intimating that macroeconomic health in the US is more resilient than previously considered. In light of yesterday’s upbeat data, investors’ expectations have strengthened that the US Fed might raise interest rates this year, and next month’s policy meeting of the central bank will be keenly anticipated for further hints.
This morning, the US Dollar is trading on a weaker footing against most of its key peers. Market participants will today note July’s personal consumption expenditure data in the US to further gauge the nation’s inflation health for July, considering that consumer prices rose less than expected in July. Moreover, August’s revised Reuters/Michigan consumer sentiment measure is also likely to attract significant attention. Moving ahead, the release of the nonfarm payrolls report will be a crucial event next week, amid strong belief that the health of the labour market remains an important concern for the US Fed in timing a rate rise.
Euro – European Markets
The common currency recovered some of yesterday’s losses against the US Dollar and is trading higher against the greenback this morning ahead of today’s preliminary German consumer price inflation report. The print is anticipated to show an ease in consumer prices, on a monthly basis, for August, strengthening fears that the Euro bloc might be pushed back into deflation. Also, prospects of a downside surprise cannot be ruled out, especially considering the recent slump in global crude oil prices. Additionally, key sentiment indices in the Euro zone will be used to gauge confidence among consumers and businesses for August. Separately, speeches by key ECB officials at the Jackson Hole Symposium will be analysed to gauge if the central bank plans to expand its stimulus programme next year, particularly considering that the outlook for global economic growth remains grim. Going forward, Euro investors will keep a tab on next week’s Euro zone labour market, flash consumer inflation and revised GDP data for further direction.
Yesterday, the Euro lost ground against the US Dollar following the release of upbeat second estimates of US GDP.
Other Currencies – Highlights
The Japanese Yen is currently trading higher against the US Dollar. There were a slew of overnight economic releases from Japan. In positive news, Japan’s unemployment rate inched down last month, compared to market expectations of an unchanged reading. Additionally, retail sales for July beat market expectations and gained momentum, partly driven by a weaker yen and partly by growth in tourism. On the flipside, Japan's consumer inflation for July slumped to its lowest level in more than two years, while household spending continued its downward trend for the same month, thereby heightening concerns over the ability of the Bank of Japan to achieve its 2% inflation target.
Earlier today, Japanese Economics Minister Akira Amari assured investors that consumer inflation in the nation was moving at a steady pace, excluding the impact of the sharp decline in oil prices. He stressed that the BoJ has full independence in deciding the future course of monetary policy, however, the central bank should ensure that an environment is created in the economy for the rise in wages to surpass that of prices.