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Hopes of GDP bounceback

Hopes of GDP bounceback


Despite the headlines generated by the latest GDP data release UK Chancellor Rishi Sunak confirmed that the furlough scheme would not be extended beyond the end of October. Pressure for further fiscal support is inevitable given fears of a sharp rise in unemployment levels in the medium term. The NIESR GDP estimate of 20.4% contraction in the three months to June also included an estimate of a 7.9% drop in the three months to July and a forecast of 14.3% growth in the three months to September. Despite the bounceback hopes  the expectation is that pre-covid levels of GDP will not appear before 2022 which hampers Sterling support.

UK Trade Secretary Liz Truss stated that US trade talks are making positive progress; to be resumed in early September. EU trade talks will resume next week. Overall, Pound support was limited yesterday despite firm risk appetite and gains on the equities markets. Sterling  dipped close to the 1.3000 mark on the Dollar and 1.1060 on the Euro.

Overnight, RICS house-price data recorded an increase to 12% in July following the -13%  contraction in June, but concerns remain over the outlook for the market. At market open this morning the Pound has taken advantage of Dollar weakness to move above 1.3050 on the the dollar, the Euro is little changed.


US consumer prices increased 0.6% for July, above consensus forecasts of 0.3% and following a 0.6% gain the previous month with the year-on-year increase at 1.0% from 0.6%. Underlying prices also rose 0.6% on the month with the year-on-year rate increasing to 1.6% from 1.2%. There was a significant increase in auto prices for the month with apparel prices also moving significantly higher. Federal Reserve officials played down the potential for higher inflation.

Boston Fed President Rosengren stated that negative interest rates are unlikely to be used in the US, although unease over recovery developments continued.




Euro-zone industrial production strengthened 9.1% for June following a 12.1% gain previously, although this was slightly below market expectations while the year-on-year decline slowed to 12.3% from 20.3%.

The Euro found support around the 1.1710 against the Dollar and gradually strengthened as the US currency came under renewed selling pressure. Commodity currencies also recovered ground which undermined potential US currency support and the Euro advanced to the 1.1800 area and is now currently trading around the 1.1825 mark. 



Data to watch

12:30 – USD – Unemployment Claims

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