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GDP a welcome break from Brexit headlines

GDP a welcome break from Brexit headlines

GBP
Sterling extended its overnight bearish consolidative mode into the early morning trading session against the Dollar, with 1.3080 the next target in sight ahead of the UK Q3 GDP release. Overall, Sterling is expected to stay under pressure in the coming days unless it can reclaim 1.3230.

Moreover, looming concerns over the Brexit negotiations also continue to increase pressure on Sterling, especially after Prime Minister Theresa May told UK lawmakers yesterday that the UK will go it alone on trade following Brexit if no deal is reached before next summer. The UK’s negotiating position does not appear to be especially strong but Sterling is suffering from Brexit fatigue. Chancellor Philip Hammond opined the UK economy is approaching full capacity and the Bank of England will have to consider the lack of slack as an indicator that tighter monetary policy is required.

The first reading of UK GDP Q3 data is released later today, expected to rise 0.3% Q/Q.

USD

The US Dollar index traded in a tight range yesterday, hanging around the 94.00 handle so far this morning with the upbeat mood around the Greenback staying well and sound during the first half of the week.

President Trump’s tweets have stated that they are very close on tax reform which is doing little to boost the Greenback. We await Trump’s decision on the Fed Chair and third quarter GDP data on Friday.

Momentum in the US looks very strong at the moment, with both the services and manufacturing PMIs for October increasing.As well as strong corporate earnings results, the Dow Jones hit a new record, increasing by 0.85%, and industrials raised 3.3%.

Today we see September’s new home sales are next on tap along with durable goods orders and the weekly report on US crude oil inventories by the EIA.

EUR

In the Eurozone yesterday, Markit Purchasing Managers’ Indices (PMIs), based on surveys of firms around Europe, showed a mixed bag but on the whole indicated strong growth across the continent. Manufacturing data was stronger than expected whilst the services sector showed a slight weakening. However, the fact remains that all indices sit above the 50 mark, providing a backbone for Draghi’s tapering plans.

The Euro strengthened against the Pound yesterday in light of this data, driving the pair to levels of 1.1150. Against the Dollar, however, the currency pair did not show much movement, hovering around 1.1765 across the day as data for the Dollar held any gains made by the Euro.

Today, German IFO business confidence is expected whereby the sentiment indicator is anticipated to rise slightly for October from 115.2 for September.

Data To Watch:

09:00 EUR IFO – Expectations (Oct) – Germany
09:00 EUR IFO – Current Assessment (Oct) – Germany
09:00 EUR IFO – Business Climate (Oct) – Germany
09:30 GBP Gross Domestic Product (QoQ) (Q3)
09:30 GBP Gross Domestic Product (YoY) (Q3)
13:30 USD Durable Goods Orders ex Transportation (Sep)
13:30 USD Durable Goods Orders (Sep)
14:00 USD Housing Price Index (MoM) (Aug)
15:00 USD New Home Sales (MoM) (Sep)
15:00 USD New Home Sales Change (MoM)
15:30 USD EIA Crude Oil Stocks change (Oct 20)

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