Poll pops Pound positivity
October’s GDP figures were unchanged from last month, whereas a slim increase was expected. Annual GDP growth sharnak to 0.7% from 0.9% previously. UK industrial production increased marginally by 0.1%, just below forecasts while manufacturing data was marginally above forecasts. Whilst the underlying growth hitting 10-year lows undermined Sterling support the reaction was limited.
After the close, Sterling briefly pushed above 1.3200 on the Dollar and the Euro edged towards 1.1900 again. The highly anticipated YouGov poll indicated a Tory majority of just 28, representing a loss of 32 since the previous survey two weeks ago. The nerves returned and the Pound swiftly declined to near 1.3100 on the Dollar before a tentative rally, and he Euro moved below 1.1835 before hitting selling interest. Further volatility is expected today as the markets readjusts positions ahead of, firstly the exit polls, then the election results.
The US NFIB small-business confidence index strengthened to a 4-month high of 104.7 for November from 102.4 previously, maintaining the run of more favourable data releases which provided an element of dollar protection. The dollar against the Euro made some headway after the expiry of substantial options, although there was further resistance on approach to 1.1100.
The latest US CPI inflation data will be released today, although the release will have to be substantially away from expectations to have a significant impact ahead of the Federal Reserve policy decision. Rates will not be cut again at this meeting and the main focus will be on forward guidance. Markets will also be monitoring 2020 interest rate projections from committee members very closely. Futures markets indicate that markets are expecting one rate cut next year and a median forecast of no change would tend to support the dollar.
The German ZEW economic sentiment index strengthened to 10.7 for December from -2.1 previously which was above consensus forecasts of 1.1 and the strongest reading since February 2018. The Euro-zone index also recorded a strong gain on the month, but there was only a slight improvement in the current German conditions component. The Euro was able to post slight gains on the data, although there was no challenge on the 1.1100 area as narrow ranges continued to dominate.
As of writing, the Euro finds itself at the 1.1075 against the Dollar.
Data to watch
13:30 – USD – CPI
13:30 – USD – Core CPI
15:30 – USD – Crude Oil Inventories
19:00 – USD – FOMC Economic Projections
19:00 – USD – FOMC Statement