Britain out of the double-dip recession
Britain emerged from recession after strongest quarterly GDP growth in five years. The UK economy grew by 1.0% between July and September, compared with the previous three months. This is more than economists and others had predicted. The economy grew after businesses recovered production lost due to an extra public holiday and ticket sales for the Olympic and Paralympic Games also added a boost. The news is a big relief for the government, under pressure after a series of gaffes and from public disenchantment with efforts to erase a huge budget deficit. Thus the UK economy is “past its worst”, BOE Deputy Governor Charlie Bean comments ahead of the GDP release, adding that it is time to be “more optimistic” about the future. “There is bound to be volatile movement from quarter to quarter but the underlying trend is for growth,” he said. In addition the Bank of England will hold off on expanding QE efforts when the latest round of asset purchases runs its course next month.
The Federal Reserve’s FOMC announcement last night delivered a ‘no change’ result, meaning that the world’s leading central bank will continue its extraordinary monetary policy measures into next year. Its Operation Twist program of swapping $45 billion securities of short-term securities into longer-term Treasurys in an effort to put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. The Fed also decided to leave its monetary policy unchanged, as widely expected, keeping the range for the federal funds rate at 0 to 0.25% and confirmed that it expected US interest rates to remain ultra-low until at least the middle part of 2015.
The ECB head acknowledged the first positive results of the reforms implemented by the EU Member States and urged national governments to “stay on course” as “in doing so, they will be able to unlock fully the enormous potential of the euro to improve living standards and carry forward the project of European integration.” Moreover, Draghi defended ECB’s bond buying program in Berlin yesterday by saying that it was not resulting in higher inflation and that a decrease in prices in some EU Member States was posing a greater risk to euro price stability. He also assured that the program would not “lead to disguised financing of governments.”
The GBP/USD pair settled the session higher, supported by a weaker EUR which weighed on GBP related cross as well as touted buying of GBP/USD by a UK clearer. In terms of domestic macro eco commentary, ahead of the eagerly awaited GDP report on Thursday, the UK statistics authority is examining whether UK PM Cameron broke the embargo on GDP data. This follows comments from the PM Cameron in Prime Minister’s Question Time in today’s House of Commons session wherein the UK PM listed recent positive economic indicators for the UK economy, before saying “the good news will keep on coming”, which some have read into as hinting towards today’s GDP reading for the UK. In terms of technical levels, supports are seen at the 21DMA lower Bollinger level at 1.5931 and then at 1.5882. On the other hand, resistance levels are seen at the 21DMA line at 1.6082 and then at 1.6178.
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