By Simon Eastman
Yesterday we saw an up and down day for sterling, mainly due to performances from other currencies, given the lack of UK data out.
First, we had a couple of key result from Germany, the EUs biggest economy, so results here often give a guide to the wider Union’s performance. The Gfk (Good for knowledge) confidence survey came out much lower than was forecast, with a reading of minus 24.2, compared to an expected figure of just minus 0.22 and down further from last months reading showing instead of improvement, the negativity in confidence is getting worse. German GDP figures also disappointed, with both the quarterly and yearly readings coming out lower than expectations, with negative figures of 0.3 and 0.5 percent, respectively. The result of the above figures, allowed sterling to rally up against both the euro and the US dollar over the course of the morning, seeing some good levels of exchange on both pairs.
The afternoon came and the story switched as a flurry of US data releases came out above forecasts. Continuing jobless claims dropped instead of rising, whilst initial jobless claims also improved, 229,000 compared to expected 245,000. GDP was up quarterly 1.3 percent compared to 1.1 percent and yearly 4.2 percent against a 4 percent prediction, while house sales data also showed an improvement above the expected forecast. As the dollar strengthened off the back of this data, the pound dropped half a euro cent and nearly a full cent against the dollar as traders favoured the greenback.
This morning UK retails sales were released early doors coming in with a mixed bag, meaning little change to exchange rates. The monthly figure improved on expectations, coming in at 0.5 percent over the 0.3 percent expected, whilst the yearly figure came out at minus 3 percent, compared to minus 2.8 percent. Hopefully the monthly figure is a sign of a better economy, but until the figures post stronger, the pound is likely to remain subdued so we are unlikely to see much upside from current levels. After lunch we head stateside for core personal consumption price index figures and durable goods orders.
A strong end to the week data wise, so expect some movement on the markets as the UK heads into the last Bank Holiday weekend of the year. Stronger than expected data from the US later could lead to the pound falling behind, as we saw yesterday. Monday we are closed, so for those with a month end requirement, give one of the team a call today to avoid the last-minute rush next week.