UK Public Sector Borrowing Jumps, US Q3 GDP Ahead
The UK and US have a fair number of beneficial economic releases lined up for the holiday-trimmed week, although whether they will be enough to trigger volatility in trading in the Pound – US Dollar currency pair is left to be seen. Earlier today, UK’s GfK consumer confidence index surprisingly rose for December, defying investor expectations of a steady reading. Additionally, the just out figures indicated a higher than expected rise in UK public sector borrowing excluding banks for November, delivering bad news for the UK Chancellor. In the session ahead, a revised set of third quarter GDP figures will take the spotlight in the US.
In Europe, the GfK group’s forward looking consumer sentiment index in Germany pointed upwards again for January after an extended period of decline.
Pound Sterling – UK Markets
Trading in the Pound – US Dollar currency pair since yesterday has already started showing signs of a holiday thinned week but for Sterling investors, today’s UK economic releases might have stirred some interest. Earlier today, GfK survey showed that UK consumers were more upbeat in December and its monthly household sentiment index had a positive score throughout the year, indicating strong consumer confidence on the back of falling unemployment and wage growth. However, their optimism about the economy for the next 12 months was left unchanged at its lowest level since July 2013. As consumers remain less confident about the economic outlook, they become less inclined to make a large purchase. Going forward, tomorrow’s revised UK GDP data will confirm whether economic growth stagnated in the third quarter.
Separately, the just out UK government’s net borrowing statistics added to disappointment from last month as public sector credit grew more than expected for November, partly aided by huge fines of around £1.1 billion paid by financial institutions.
US Dollar – US Markets
The US Dollar is trading in a tight range against the Euro and the Pound this morning as trading remains subdued ahead of the Christmas break on Friday. However, a slew of key economic indicators including GDP and inflation data will be out in the US later today, which will be eyed for further cues on the gradual path of tightening the Federal Reserve (Fed) could adapt in the next year. A revised set of US third quarter GDP is expected to deviate downwards from its previous look, putting the annualised growth rate at 1.9% compared with 2.1% estimated previously. Also, a sharp decline in oil prices could heavily weigh on the personal consumption expenditure index for the third quarter. Market participants will also watch out for house price and existing home sales data to gauge the health of the US residential market.
Yesterday, the US Dollar softened against most of its key peers after weaker than expected Chicago Fed’s national activity report signalled slowing growth across the US economy.
Euro – European Markets
Earlier today, German consumer confidence as measured by the GfK survey edged up in January for the first time since September 2015. The survey somewhat eased fears that a refugee crisis and the recent Paris terrorist attacks could hurt economic and income expectations in Germany. In addition, German import prices declined less than market consensus in November when compared to the previous month. However, the shared currency hardly moved following the release of slightly upbeat German economic data. The Euro continues to hold steady against the US Dollar this morning, having risen above the 1.09 mark in overnight trading following broad based weakness in the greenback and as markets digested Sunday’s general election results in Spain. The gains were kept in check as no party won a clear majority of parliamentary seats, triggering worries about economic reforms in the Euro zone’s fourth largest economy.
Going forward, investors will keenly monitor a revised estimate of third quarter economic growth data in France along with Italy’s industrial sales and orders tomorrow before heading for a Christmas break.
Other Currencies – Highlights
Switzerland’s trade surplus narrowed more than expected in November following slower growth in the nation’s export volumes from the previous month, according to a report by the Swiss Federal Customs Administration published earlier today. Data from other sources had previously revealed that total value of watch exports in November from a year ago had failed to exceed CHF2.0 billion, bucking the trend seen in the prior four years. It is likely that this decline in watch exports largely contributed to the losses in the overall export volumes of the nation.
The Swiss Franc hardly faltered in response to the economic data against the US Dollar today. Looking at the wider picture, the US Dollar – Swiss Franc currency pair hovers close to the parity level after it had rallied above the 1.03 mark earlier this month, before the European Central Bank’s policy announcement had curbed the US Dollar strength. However, Fed’s widely expected move to increase its benchmark interest rate last week has buoyed the greenback against its key peers for a longer term.