Sterling Rallies on GDP; Attention Turns to ECB

Initial figures showed that the UK’s economy grew at a faster pace in Q3 than anticipated, which sent the pound higher as investors anticipated that this could make a BoE rate hike more likely next week. The economy grew 0.4%, up from 0.3% in Q2. Sterling rallied around 1.0% against the euro and the dollar, capping gains in the afternoon session.

Previous Day's Market Highlights

Initial figures showed that the UK’s economy grew at a faster pace in Q3 than anticipated, which sent the pound higher as investors anticipated that this could make a BoE rate hike more likely next week. The economy grew 0.4%, up from 0.3% in Q2. Sterling rallied around 1.0% against the euro and the dollar, capping gains in the afternoon session.
 
The Canadian dollar fell as the Bank of Canada kept interest rates on hold at 1.0%, pushing sterling-loonie to its highest levels since 28 June. The kiwi dollar’s woes continued with a wider-than-forecast trade balance. This additional pressure saw sterling-kiwi break 1.9300 overnight for the first time since the EU referendum.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1210 1.1416 1.1069 3.04%
GBP / USD 1.3253 1.3456 1.3027 3.19%
EUR / USD 1.1822 1.1880 1.1669 1.78%
GBP/AUD 1.7201 1.7241 1.6675 3.28%
GBP / NZD 1.9251 1.9334 1.8367 5.00%
GBP / CAD 1.6959 1.7002 1.6350 3.83%

Today's Market Highlights

Attention turns to the day’s highly anticipated ECB meeting. The ECB is expected to announce the next step for its QE programme (12:45 BST), whilst keeping interest rates on hold. Should the ECB postpone announcing the next step, markets would likely be disappointed and the euro would likely weaken.
 
If the reduction in monthly purchases or the extension of the timeline purchases indicates a greater amount of stimulus than markets are anticipating, the euro could weaken, although overall signs of tapering are usually supportive for the euro. 

If the steps announced today are considered more hawkish than expected, such as a larger reduction in monthly purchases or shorter timeframe extension, the euro may strengthen. 

ECB President Draghi may try to take a more cautious tone in the press conference (from 13:30 BST), but in recent months markets have chosen instead to focus on the fact that the ECB is headed on a path of policy normalisation.
 
While traders’ focus will primarily be on the ECB, they’ll also keep an eye on US unemployment and housing data (13:30, 15:00 BST) for any surprises ahead of next week’s Fed meeting.

Today's Economic Calendar

Time Currency Release Consensus Previous
12:45 EUR ECB Interest Rate Decision 0.0% 0.0%
12:45 EUR ECB Deposit Rate Decision -0.4% -0.4%
13:30 EUR ECB Press Conference
13:30 USD Initial Jobless Claims (20 Oct) 235K 222K
13:30 USD Goods Trade Balance (Sep) $-63.80B $-62.94B
15:00 USD Pending Home Sales YoY (Sep) -3.1%
15:30 USD FOMC Member Kashkari Speech