GBP/EUR 1.1985 (0.8343)
Markets were relatively quiet yesterday but there was one notable out-performer in GBP. We commented yesterday that Mark Carney expressed concerns on domestic consumption, citing an increase would be needed to help boost economic growth and drive it forward and with yesterday’s revised GDP figures the pound got the lift it needed. As we expected the actual GDP figures were unchanged confirming .8% growth in Q3 and 1.5% YoY, the lift came from the underlying data that saw improvements in private consumption with rising house prices also contributing to the economic growth.
The BOE and government still remain cautious on the recovery and also remain conscious that a rebalancing of the economy is still required, whilst down playing talk of a housing bubble. Mark Carney is expected to give the BOE’s financial stability report and we would expect some of Tuesday’s parliament treasury committee topics to be brought up again. Concerns Europe’s continued issues will effect export led growth from the UK are likely to be addressed, as are housing concerns. All this however has not halted GBP and for now GBPUSD is approaching its annual highs, with EURGBP looking to test lower towards .8300.
The European calendar has been light all week but with the US on Holiday today all today’s action will be coming from the European session and the heavy amount of event risk and data releases that come with it. Today on tap we have German unemployment, Eurozone consumer confidence and German inflation in the form of CPI. All can be very decisive for the single currency which has remained firm despite this month’s ECB rate cut, EURUSD is in fact up on the month.
There was plenty to keep our focus on the US yesterday before they shut up shop for the week. Markets are open in the US tomorrow but activity will be light. The US entered the holiday period on a wave of good data. US jobless claims fell to 316k from 330k giving hope for those looking for an earlier taper, further support came from U of Michigan consumer confidence report up 75.1 vs 73, Chicago PMI data came in better than expected also at 63.0 vs 60, a market high on confidence heading into a key shopping period can give a good lift for the US into the year end.