UK Q3 GDP Less Than Estimates
Market focus today is on a string of economic releases in the UK and the US. Just now, the final snapshot of the third quarter UK GDP figures showed that the economy expanded at a slower pace than initially thought, due to downward revisions to the finance industry. However, Britain’s current account deficit for the third quarter brought in some cheer to the UK central bank, as it defied expectations of a sharp widening in deficit. The current account gap currently equates to 3.7% of GDP.
Later in the day, a wave of US economic numbers is scheduled which includes durable goods orders, personal spending and income, new home sales and a consumer morale report.
Pound Sterling – UK Markets
This morning, the Pound has partly recovered from its weakness against the greenback despite expectations that the Bank of England (BoE) will further delay its normalisation cycle amid the ongoing 8 to 1 split within the UK central bank. The just released final UK growth data surprised investors after the UK economy’s growth rate was revised lower from its previous estimate, signalling that the economy lost some of its growth momentum. The revision left annual economic growth rate at 2.1%, down from an earlier estimate of 2.3% for the third quarter. The stagnation in growth is bad news for the UK economy which has been reeling under the impact of poor wage growth and inflation. The figures indicate that the BoE Governor will be less tempted to raise rates in the year ahead. Additionally, UK’s third quarter current account deficit was little changed from the three months ended June, as a doubling in trade deficit was overshadowed by a wider narrowing in the deficit on investment income.
Sterling traded below the 1.49 mark against the US Dollar yesterday after data showed that UK public sector borrowing spiked in November.
US Dollar – US Markets
The US Dollar edged higher against the Euro this morning, rebounding from the previous session’s losses amid thin trading volumes. On a relatively busy day for US economic releases, traders will watch out for US durable goods orders, University of Michigan’s consumer sentiment index, personal spending and income figures and new home sales. Yesterday, the US Q3 growth was revised down, suggesting a sluggish recovery trend since the last recession. One economic trend that has not contributed to recovery is capital spending as firms remain hesitant to deploy funds in their businesses citing weak demand. Today’s durable goods report for new orders is anticipated to decline in November, suggesting tepid pace of activity that could weigh on economic growth.
Additionally, a report by the US National Association of Realtors yesterday showed that US existing home sales unexpectedly tumbled to its weakest level in 19 months for November as sparse inventory and affordability issues held back potential buyers’ ability to make a purchase. The US Dollar nudged lower against its key peers yesterday after the downbeat economic report.
Euro – European Markets
Earlier in the day, the Euro pulled back from its three day winning streak against the US Dollar, but the losses were capped just above the 1.09 mark. As traders enter into a holiday lull, there is very little data scheduled in today’s European economic calendar which could influence trading in the shared currency against the major currencies. As a result, the Euro investors will likely track economic and political news across the globe to gauge the direction in the home currency against its key peers. Today, revised quarterly national account in France headlined a light day for European economic news. According to official numbers, France which is one of the big four economies in the Euro zone expanded as initially thought for the third quarter of this year. The final GDP print confirmed that a rise in consumer spending during the three months ended September drove growth in the French economy.
In other news, Greece’s foreign creditors yesterday authorised a payment of EUR 1.00 billion under the terms of its third bailout programme after Athens satisfied their demands for additional economic reforms.
Other Currencies – Highlights
The Kiwi Dollar is currently trading in a narrow range against the US Dollar in thin trading heading into the Christmas holiday break, while investor sentiment for greenback has slightly dampened following overnight mixed US economic data delivery. Earlier, New Zealand’s trade deficit narrowed more than expected for November amid a rise in export volumes. Data indicated that the nation’s exports got a boost from an increase in demand in the European Union and China which overshadowed softer orders from Australia. The pick-up in export growth was largely seen in New Zealand’s dairy and meat products, with the latter possibly reflecting the benefits of early slaughter due to dry weather. Meanwhile, imports also inched up more than market estimates for November but were underpinned by importation of transport equipment.
Moving into the session ahead, trading in the Kiwi – US Dollar currency pair will likely be influenced by a slew of US economic data including durable goods orders, personal income and spending data, new home sales and Michigan University’s consumer confidence index.