Finally Gauging US Growth

The pound rallies further as markets continue to price in a delay to Brexit ahead of today's long-awaited US GDP figures

Previous Day's Market Highlights

Sterling climbed further on Tuesday, adding around 0.4% against the dollar and 0.6% against the euro, as markets continued to price in an extension to the Article 50 negotiating period after the Evening Standard reported that the EU could be looking to seek a 2 year extension. Against the euro, the pound climbed to its highest level in more than 21 months, above the €1.17 mark. It was a similar story against the dollar, with the pound rallying to its highest levels since July last year, above the $1.33 level. The evening’s House of Commons vote passed without surprises, though the passing of Yvette Cooper’s amendment will provide markets with confirmation that the Prime Minister will stick to the timetable laid out yesterday. 

Elsewhere, the euro traded broadly weaker, falling by around 0.2%, with the single currency not helped by consumer confidence remaining in pessimistic territory. The Australian and New Zealand dollars also weakened, both losing around 0.6%, as markets became more cautious in the face of rising geopolitical risk including escalating tensions between India and Pakistan, President Trump’s meeting with North Korean Leader Kim Jong-Un and US trade negotiator Lighthizer’s testimony to Congress on the US-China accord. In contrast, the US dollar firmed by around 0.25% as Fed Chair Powell continued to strike a cautious tone in testimony to Congress and confirmed that the balance sheet run-off would conclude this year. 

Away from FX, European equity markets lost ground, with the pan-European Stoxx 600 losing 0.4% as investors became more risk averse. In the US, markets the S&P 500 closed unchanged, while the Dow Jones Industrial Average fell for a second consecutive day. Finally, oil prices surged by more than 2%, as US stockpiles fell by 8 million barrels and OPEC confirmed they would proceed with planned supply cuts despite President Trump’s intervention earlier this week.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1672 1.1724 1.1312 3.51%
GBP/USD 1.3285 1.3350 1.2773 4.32%
EUR/USD 1.1379 1.1514 1.1233 2.44%
GBP/AUD 1.8620 1.8697 1.7844 4.56%
GBP/NZD 1.9450 1.9511 1.8701 4.15%
GBP/CAD 1.7499 1.7518 1.6960 3.31%

Today's Market Highlights

Today’s focus will be on the long-awaited US GDP figures for the final quarter of last year, delayed due to the government shutdown. Expectations are for growth to have softened to 2.3% on an annualised quarter-on-quarter basis, from 3.4% previously, with such a figure likely to reaffirm the Fed’s patient stance on further monetary policy tightening. The slowdown in economic growth will not come as a surprise to many market participants, with the US following a broader global trend of a softening in economic activity. Also in focus from the US will be the weekly initial jobless claims figure, set to hold steady at around 220,000. 

No economic data or speakers are due from the UK, therefore investors are likely to pause for breath to digest recent Brexit developments after 4 consecutive days of gains for the pound. Meanwhile, the euro is likely to take its lead from German inflation figures, due early in the afternoon, with HICP (the ECB’s preferred measure) set to remain unchanged at 1.7% on a year-over-year basis. The only other notable economic data comes overnight from Japan, with Tokyo CPI and core CPI figures expected to show the land of the rising sun continuing to battle with near non-existent inflation.

Finally, markets will hear from a couple of Fed speakers in the afternoon session with Vice Chair Clarida and Atlanta Fed President Bostic both due up though their comments are unlikely to differ significantly from Fed Chair Powell’s Congressional testimony. 

Today's Economic Calendar

Time Currency Release Consensus Previous
13:00 EUR German HICP Inflation (y/y) 1.7% 1.7%
13:30 USD GDP (q/q - annualised, Q4 18) 2.3% 3.4%
13:30 USD Initial Jobless Claims 220k 216k
23:30 JPY Tokyo Core CPI (y/y) 1.0% 1.1%