- Pound recovers despite GDP downgrade – British Q3 growth revised to 0.4% QoQ.
- GBP/EUR rebounds 120 pips – Spanish mainstream parties unable to form coalition.
- ‘Cable’ rebounds from eight-month low – US durable goods print at 0%.
- Canadian GDP flat in month of October – GBP/CAD flat on day.
Sterling
After depreciating significantly across the board on Tuesday Sterling recovered slightly yesterday even though British third quarter GDP was downgraded by the Office for National Statistics (ONS).
The Bank of England’s decision to leave rates on hold through 2015 was backed up by the ONS’ latest revisions, which saw third quarter growth downgraded from 0.5% to 0.4% and second quarter GDP revised down from 0.7% to 0.5%. The annualised growth score for the third quarter was also subject to revision, falling from 2.3% to a two-year low of 2.1%, which undershot the predictions of all 30 of the economists asked by Reuters.
Euro
Sterling bounced higher by around 120 pips against the Euro yesterday as investors locked in profit from the two-month low that GBP/EUR reached on Tuesday.
The single currency may have been hampered by news that Spanish Socialist Party leader Pedro Sanchez, who came second in the recent general election, is not willing to form a grand coalition with current Prime Minister’s mainstream right People’s Party. The announcement sets up a period of intense negotiation and unhelpful speculation as politicians attempt to form a new government and markets weigh the implications of the different options.
This political uncertainty could start to put pressure on the Euro, especially if it looks like anti-austerity party Podemos could be involved in a coalition of some form.
US Dollar
Despite American data printing sturdily, the Pound was afforded the opportunity to claw back some of its recent losses against the US Dollar yesterday.
US durable goods orders came in at 0.0% for November, which marked a sharp slowdown from October’s 2.9% but was significantly better than the median market forecast of -0.6%. New home sales beat expectations of 2.0% with a score of 4.3% and PCE inflation printed at 1.3% as expected. But the decent US ecostats were not enough to drive ‘Cable’ lower, as investors took advantage of the cheapest Pound to US Dollar exchange rate since April.
Canadian Dollar
Sterling initially rallied by around a cent against the Canadian Dollar yesterday but surprisingly the ‘Loonie’ recovered following a worse-than-anticipated Canadian GDP report.
Data showed that the North American economy stagnated on a monthly basis in October, which contrasted expectations of 0.2% growth. The annual figure was even worse, at -0.2% compared to forecasts of -0.1%. However, the commodity-sensitive Canadian Dollar managed to strengthen slightly versus Sterling following the result, possibly helped by a mini recovery in crude oil prices.
Australian Dollar
Sterling appreciated by around a cent against the Australian Dollar yesterday as volatility in the run-up to the Christmas Holidays continued.
Because less traders are at their desks in the days around Christmas and New Year liquidity is much lower, which in turn means that prices tend to fluctuate more strongly at this time of year.
New Zealand Dollar
The Pound to New Zealand Dollar exchange rate rallied by over a cent yesterday to recover from the six month low that GBP/NZD struck on Tuesday afternoon. It appears that profit-taking was the major driver behind the move because British data did not impress.
Data Released Today
09:30 GBP BBA Loans for House Purchase (NOV) Medium 46000
13:30 USD Initial Jobless Claims (DEC 19) Medium 270k