Pound Falls as Annualised UK GDP Revised Lower for Second Quarter
The Pound slumped during Friday’s session after the finalised UK GDP figures for the second-quarter showed a slower-than-anticipated rate of year-on-year growth. While quarter-on-quarter growth held steady at 0.3%, in line with earlier estimates, annualised growth was revised lower from 1.7% to 1.5%.
Additionally, the July index of services showed a surprise -0.2% decline, casting doubts over the health of the UK’s dominant sector.
The most important UK data released this week will be Wednesday’s Services PMI for September. Considering recent data has pointed to a slowdown in the sector, markets will be hoping for signs of strength from the PMI.
Strong German Employment Figures Cause GBP/EUR Tumble
September unemployment figures for Germany impressed on Friday. The number of people out of work fell -23,000 instead of the -5,000 expected; enough to push the unemployment rate down to a fresh post-unification low of 5.6%.
Eurozone consumer price data may have slightly disappointed forecasts, but overall markets were happy enough with the German jobs data to keep buying into the Euro.
On Thursday the account of the latest European Central Bank (ECB) monetary policy meeting will be published. Markets will be interested to see to what extent tapering of the quantitative easing programme was discussed.
Slower US Consumption Slows Pace of GBP/USD Losses
The GBP/USD exchange rate tumbled ahead of the weekend, despite the US having also released disappointing economic data. The personal consumption expenditure core index for August showed that growth had slowed unexpectedly from 1.4% to 1.3%.
Personal consumption is the Federal Reserve’s preferred way of gauging the strength of inflationary pressure, so a slowing pace of price growth was enough to soften appetite for USD against other majors, but not the Pound.
It’s a busy week for key US data, starting with today’s ISM manufacturing index for September, which is forecast to edge lower.
GBP/CAD Stuck at Opening Levels after Canadian GDP Disappointment
Canada also released below-forecast GDP data for July on Friday, preventing the GBP/CAD exchange rate from losing ground. On the month the Canadian economy stagnated, while year-on-year GDP slowed from an upwardly revised 4.4% to 3.8%, against predictions of a weakening to 3.9%.
Canadian employment figures will be released on Friday. Strong results will be required to help markets shake off the fears that the Bank of Canada (BOC) have hiked interest rates before the economy is strong enough to handle higher borrowing costs.
GBP/AUD Holds Steady as High-Risk ‘Aussie’ Left Unappealing
The Pound only suffered mild losses against the Australian Dollar on Friday. With the Euro on appealing form, markets were preferring to head into the safer common currency than the high-risk ‘Aussie’. There was little data to support AUD, other than figures showing that private sector credit growth ticked higher from 5.4% to 5.5% as expected.
The Reserve Bank of Australia (RBA) delivers its latest interest rate decision on Tuesday. A change to policy is unlikely, but the post-meeting commentary will tell markets whether or not to expect adjustments in the near-term.
UK Economic Data Causes GBP/NZD to Weaken
GBP/NZD slid lower on the back of poor UK economic data on Friday. There were no New Zealand ecostats released, but cooling appetite for the Pound allowed the New Zealand Dollar to notch up strong gains.
The results of the latest Global Dairy Trade auction on Tuesday could push the New Zealand Dollar higher if milk prices rise.
Data Released Today
2nd October 15:00 USD ISM Manufacturing (SEP)
3rd October NZD Dairy Auction Avg. Winning Price MT (OCT 3)
3rd October 04:30 AUD Reserve Bank of Australia Rate Decision (OCT 3)
4th October 09:30 GBP Markit/CIPS UK Services PMI (SEP)
5th October 12:30 EUR ECB account of the monetary policy meeting
6th October 13:30 CAD Net Change in Employment (SEP)
6th October 13:30 CAD Unemployment Rate (SEP)