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US GDP beats forecast.

By Jake Trask

Sterling remains depressed this morning as Brexit sentiment continues to weigh on the pound. Chancellor of the Exchequer, Philip Hammond is due to deliver his budget this afternoon with speculation that an end to austerity will be indicated. Whatever Hammond says is unlikely to move the pound dramatically as its direction is currently dictated by Brexit related news. Looking ahead we have the Bank of England’s quarterly Inflation Report on Thursday with growth and CPI expectations likely to be the main talking points. GBP/USD continues to trade around the 1.28 handle.

US GDP beat forecast on Friday with the US showing growth of an annualised 3.5% for the third quarter. The first estimate was slightly above predictions of 3.3% however the response from the dollar was muted. There is a perception that the US economy is peaking at present and the despite the strong number it was 0.8% lower than the previous three months. This week’s big news from the States will be Friday’s jobs report with Non-Farm Payrolls expected to rise by 191k. The accompanying wage growth number will likely be the main point of interest with an uptick on 0.2% expected.

Italian politics continue to weigh on the euro with EUR/USD trading around the 1.14 handle. The EU Commission's latest economic forecasts are released tomorrow with a revision downwards of growth likely to be seen. The ongoing Italian budget dispute has hit the euro hard of late with extra downward pressure exerted by credit agency Standard and Poor’s decision on Friday to lower its outlook for the country to negative from stable. The shared currency is unlikely to rise as long as the impasse continues and with PMI numbers showing a slowdown in output the euro will likely be capped for the foreseeable future. GBP/EUR trades at 1.1250.

After a quiet couple of weeks there is some data of note due on the horizon from Down Under. Tuesday night sees quarterly inflation numbers released with a rise in prices of 0.5% penciled in. The Australian economy has been treading water of late meaning the next rate hike from the RBA is expected to be deep into 2019 however should prices be seen to be rising faster than expected we should see the Aussie rally. GBP/AUD trades at 1.8060.

The loonie's gain seen last week have been eroded by a risk off market and continued dollar strength. The Bank of Canada raised interest rates as expected last week pushing USD/CAD below 1.30 briefly however market sentiment has played against CAD since the decision to hike. Monthly growth figures are published on Wednesday with employment numbers due on Friday. GBP/CAD trades at 1.6780.

It’s another quiet week from New Zealand with only Thursday nights ANZ Business Confidence survey the only event of note. External matters and risk on/off trade will be the main drivers for the kiwi this week. GBP/NZD is at 1.9580.