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Markets await UK GDP data

By Jake Trask

Sterling has had a miserable 24 hours as a lack of fundamental data has led investors to get the jitters over Brexit as often happens on quiet days. We have dipped another 25 pips against the dollar this morning, a signal that markets are possibly expecting the worst from this morning’s Prelim UK GDP data for the third quarter. Growth of 0.3% q/q is expected however given Septembers abysmal Retail Sales figure that was released last week we could see it miss target which could put some doubts in the minds of Bank of England’s Monetary Policy Committee members over the appropriateness of raising interest rates next month. The markets are currently expecting around a 80% chance of a hike on the 2nd November.

 News reports from around the world indicate that US President, Donald Trump is leaning towards promoting current FOMC member, Jerome Powell to the role of Fed Chair from 2018. A new President traditionally lets the incumbent Fed Chair serve another term however as we all know Trump doesn’t stand on ceremony. This afternoon we have Durable Goods and Core Durable Goods numbers from the States. GBP/USD trades around 1.3120 (midmarket rate).

Yesterday saw the monthly Eurozone PMIs all print well above the 50 mark with the manufacturing sectors purple patch showing no sign of waning. French Manufacturing hit a 6 ½ year high of 56.7 (exp 56.2); the German figure was even better at 60.5 (exp 60.1) the second best reading in 6 ½ years (after last month’s 60.6) and the overall reading for the EZ as a whole (58.6) was its best since Feb 2011. Despite the upbeat news EUR/USD only rallied around 20 pips on the news as the markets currently appear to be in a holding pattern ahead of tomorrow’s key ECB Rate Decision and Press Conference where a scaling back of the banks Quantitative Easing programme is expected to be confirmed. GBP/EUR trades at 1.1155 (midmarket rate).

The Aussie slumped overnight as quarterly inflation missed target casting doubt over the pace of rate rises from the RBA through 2018. The overall reading was expected to rise 0.8% for Q3 however it only reached 0.6% with the Trimmed Mean reading (which strips out the most volatile goods) showing 0.4% when 0.5% was predicted. AUD/USD collapsed from .7780 to around .7725 and has slipped lower still to its current .7710 (midmarket rate). GBP/AUD has moved up from 1.6880 to currently sit at 1.7020 (midmarket rate).

The Kiwis woes continue unabated since the election of Jacinda Ardern with the local dollar now worth less than 69 US cents for the first time since May while at the same time GBP/NZD is above 1.90 for the first time since July last year. The new administrations potential policies have sent a shiver through the markets and the Kiwi is suffering as a result. GBP/NZD trades at 1.9045 (midmarket) ahead of tonight’s Trade Balance figures from NZ.