UK GDP in focus on Friday as construction data beats expectations
Tuesday 7 March, 2023
Daily Currency UpdateUK construction PMI posted a better than expected 54.6 versus expectations of 48.7. This points to Friday's closely watched UK GDP data, which if better than expected, could provide support for the Pound. The Bank of England could be coming to the end of its tightening cycle, with any future rate hikes from Andrew Bailey based on how the UK economy can cope with higher borrowing costs. Positive data releases like this allow the central bank more leeway to raise rates to control inflation, which would support the Pound.
Key MoversThe US federal Reserve remain in focus as Jerome Powell's testimony before Congress takes place on Tuesday and Wednesday. The markets will be focusing on Powell and any comments that can give a decisive message on the future pace of interest rates increases over the coming months. The US Dollar has performed well in the last two weeks, as the market believes the peak of where interest rates will go in the US is higher than it was expected to be three months ago. Data has been resilient in the US and the economy has performed better than expected too. There are also concerns about the ongoing China-US tensions, which seems to have come to the forefront again with the Chinese foreign minister stating that "The US claims that it seeks to outcompete China but does not seek conflict. Yet in reality, its so-called competition aims to contain and suppress China in all respects and get the two countries locked in a zero-sum game." There are also many interesting theories about why China is lowering its aim for GDP growth to around 5% this year from around 5.5% in 2022. Bloomberg said It may be that they're lowering the bar to set up potential a positive surprise later in the year. A fall in China's exports for the January-February period pointed to continued weakness in demand for the country's products, backing government concerns that a global slowdown will be felt at home. Exports in the two months were 6.8% lower than a year before, after a 9.9% annual fall seen in December.
- GBP/USD: 1.1945 - 1.2020 ▼
- GBP/EUR: 1.1185 - 1.1265 ▼
- GBP/AUD: 1.8180 - 1.7875 ▲
- EUR/USD: 1.0560 - 1.0660 ▼