GBP/EUR 1.1727 (0.8525)
GBP data continues to support the pound but the inability for GBP to push higher on Friday suggests the pounds rally may be coming to an end. GDP data released on Friday came in very much as expected with .8% growth in Q3, bringing the year on year figure to 1.5%. This is a strong reading for the UK but we saw little reaction in sterling crosses.
Possibly the most surprising was GBPUSD, US durable goods posted a stronger figure but if you remove the transportation aspect the figures were a lot worse than expected, posting -.1% versus estimated growth of .5%. Following the weak durable goods order on Friday was the U of Michigan consumer confidence survey posting 73.2 versus 75 expected.
Overnight we’ve seen JPY under selling pressure as currencies geared to more positive risk traded firmer, most notable AUD and NZD. Some of this could well be reaction to the weak US figures from Friday, the Asian session coming to the party late obvious feel this pushes tapering back into 2014, with Asian stocks rising over 1%.
We have yet to get full confirmation of an extension of QE into 2014, but clarification will be looked for from this week’s FOMC meeting. It would appear that March 2014 is when the market now believes tapering will begin, and as such asset have been priced accordingly with the S&P rallying to record highs whilst the USD has continued to slide. Any indication of tapering beginning sooner rather than later could well see these recent moves reversed sharply.
Today’s European session is quiet with little to attract market attention until the US session begins. We will be looking ahead to the US industrial production and pending homes sales data for clues on the health of the US economy. Forecasts point towards a relatively neutral releases however recent US data has missed to the downside, if this continues to be the case we may see stocks continue to push higher as monetary easing lifts stocks and put pressure on the USD