It’s all in the details for the US
On the surface, the US GDP figure yesterday might have looked a little lack lustre. But if you get inside the details a little more and there were clues that may point towards an interest rate conversation.
The US second-quarter GDP grew at 2.3% which was a bit lower than was forecast by many. But drilling down further, the figure that many investors are focussing on is the quarter on quarter gain in the core PCE deflator. This is the personal consumption expenditures index which measures changes in the prices paid by consumers, without the volatility caused by rapid movements in food and energy prices. This measurement is often the preferred method of gauging inflation. This figure was up 1.8%, so there could be an environment of pressure surrounding the Federal Reserve interest rate conversation after all.
The GBP USD moved rapidly after the news before settling down with the USD gaining ground against the GBP ultimately by London trading close. The course of the GBP was more muted, and we saw some selling off during the evening to open lower day on day.
The UK GfK consumer confidence figure has waned slightly in the face of global headwinds, principally driven by the issues from Greece. This comes a month after recording a huge increase in the index that measures consumers’ sentiment towards the strength of the economy, and has a natural impact on retail sales, price movement and purchasing managers’ indexes among others. That the figure has pulled back from a figure of +7 to +4 may indicate a significant erosion of confidence. The erosion can be attributed to the woes in the Eurozone and other global economic issues such as Chinese equity market performance, by itself this is actually still not a bad figure when viewed in isolation.
Today in economic news, there are a number of mid-tier data releases largely around Producer Price pressures in Australia and some European nations’ individual figures including German retail sales, which could be of merit.
The Eurozone inflation data for me is the focus of today’s news, which is released with their jobs data as well. All eyes will be on this information for detail on whether or not the stimulus employed by the European Central Bank is showing signs of working. We may well see a day today where the GBP retreats as further digesting of the US inflation data takes place and potential inflation rises from the Eurozone happen. Mario Draghi, European Central Bank chief has in the past been optimistic and complimentary about the asset purchases so far.