The just out revised second quarter GDP report in the UK has confirmed the steady growth trend witnessed in the nation over the past year. However, another report indicated that the nation’s current account deficit widened unexpectedly for the second quarter. Nevertheless, further hints over the pace of growth during the third quarter will be clearer with the release of this week’s domestic PMI reports and is likely to stir volatility in the Pound against the majors.
Against the backdrop of encouraging German consumer price inflation and weak employment data, today’s Euro zone inflation and unemployment data will be keenly eyed for further clarity. Any deterioration in inflation would add pressure on the ECB to act swiftly at its policy meeting due this week.
Pound Sterling – UK Markets
The Pound showed muted reaction against the majors after the final GDP reading just released stated that the nation’s economy continued to expand during the second quarter, in line with market estimates. However, another data indicated that current account deficit in the UK widened surprisingly for the second quarter which might keep a tight lid on further gains in the Pound against the majors. With the third quarter drawing close to an end, investors keenly await this week’s domestic PMI reports to ascertain whether the pace of growth has been sustained during the respective sectors. If the PMIs surprise on the upside, it might trigger a debate among MPC policymakers to ascertain the amount of slack remaining in the economy. Later today, investors will keep a close watch on the comments from David Miles, a MPC member, for his views on the central bank’s monetary policy stance.
The Pound remained in a tight range against the US Dollar in yesterday’s trading session. Meanwhile, data released overnight by GfK indicated that consumer confidence in the nation dropped more than expected for September amid concerns over stagnant wages in the UK.
US Dollar – US Markets
The greenback is trading in a tight range against the common currency this morning. Today’s US economic data is not expected to provide much direction to the US Dollar, although markets will keep a tab on the Conference Board’s consumer confidence report for cues on any improvement in domestic morale, especially after last week’s soft Reuters/Michigan consumer sentiment numbers.
The greenback remained range bound against the majors yesterday. Data released in the US showed that consumer spending rebounded for August. This was in contrast to the recent soft inflation data and downbeat labour market report which showed less than expected job additions in the US. Considering mixed economic data lately, markets will eye this week’s non-farm payrolls report for September for further insight into the nation’s economic conditions during the third quarter. Meanwhile, the Fed official, Charles Evans, stated that interest rates should be kept low until 2016 as there remains a considerable slack in the economy. However, these comments stirred little movement in the US Dollar, particularly amid mixed comments from Fed officials lately.
Euro – European Markets
Data out earlier today showed that German retail sales rebounded unexpectedly for August. However, with the recent GfK report showing deterioration in consumer morale, markets will keep an eye on retail sales data in the next few months for signs of any pass through effects of the Ukrainian crisis. Additionally, today’s Euro zone inflation numbers will attract considerable market attention, especially with the ECB policy meeting in the week ahead. Any downside in the region’s inflation might strengthen prospects of the ECB implementing a broader asset purchase programme to address the region’s macro troubles.
The Euro remained range bound against the majors yesterday amid mixed economic data in Europe. The German consumer price inflation remained flat unexpectedly and did not show another decline for September, suggesting that deflationary headwinds in the nation might be losing momentum. However, various confidence surveys in Europe portrayed a dismal picture for September, stoking concerns that weak domestic confidence might keep spending under check and create pressure on the ECB to add further stimulus in the region.
Other Currencies – Highlights
The Kiwi Dollar gained ground against the greenback in yesterday’s trading session after data showed that building permits growth in New Zealand remained flat for August. With the construction sector showing signs of a slowdown, markets remain confounded on whether positive developments across the remaining sectors will be sufficient to keep the nation’s economic growth supported.
Data released earlier today showed that sentiment among businesses in New Zealand deteriorated for the seventh straight month. However, another report revealed that domestic firms remained optimistic about their future outlook, especially with a stable government elected at the recent national elections. With no other domestic macro triggers scheduled today, the Kiwi Dollar is expected to remain under pressure, particularly after China reported a slowdown in its manufacturing activity. Moving ahead, traders will keep an eye on this week’s US official labour market report for further direction to the Kiwi Dollar-US Dollar pair.
The US Dollar Rallies on Upbeat Data and Hawkish Fed Stance
Soft CPI Data, Lack of Progress in Brexit Talks Hurt Pound Sterling
Strong Labour Market Data from UK Lift Pound Sterling