Morning Report: 24 December 2014

24th December 2014 By: Admin

GBP Yesterday saw the release of the final reading of the third quarter Gross Domestic Product (GDP) from the UK with the figure coming in at 2.6 percent year-on-year, which disappointed markets as 3.0 percent was expected. As a result, the pound was under pressure for the majority of yesterday’s trading session. Consumers drove the UK economy to a seventh straight quarter of growth in Q3 as the euro-area slump held back exports and investment plunged. Household spending rose 0.9 percent, the most in more than four years, accounting for almost all of the economy’s 0.7 percent growth in the quarter, the Office for National Statistics said. Falling oil prices and slowing inflation are helping to support domestic demand, the main driver of Britain’s economy this year. Discounting by retailers is also boosting activity at stores, countering a weaker external environment. “While the overall growth performance still looked healthy in the third quarter, the growth mix on the expenditure side of the economy was somewhat unbalanced and disappointing,” said Howard Archer, chief European economist at IHS Global Insight in London.

USD The US economy grew at 5.0 percent in the third quarter, the quickest pace in 11 years and the strongest sign yet that growth has decisively shifted into a higher gear. The strong US GDP figure prompted markets to bring forward the timing of a likely hike in interest rates by the Federal Reserve, which last week gave an upbeat assessment of the economy. USD was 0.1 percent from its strongest level in two years versus the euro as a result. Today sees the release of the initial jobless claims from the US and they are expected to be unchanged from the previous week with a figure of 290,000 forecast.

EUR The euro fell to its lowest level since the eurozone crisis of 2012 yesterday during thin trading as Greece failed to elect a new president in its second round of voting. The single currency fell 0.3 per cent against the dollar, its weakest level since Mario Draghi, president of the European Central Bank, promised to do “whatever it takes” to save the euro at the height of the crisis more than two years ago. If Greece’s coalition government fails to elect its presidential candidate in a third round of voting next week, a general election would be triggered at which investors fear the anti-bailout Syriza party could come to power, creating fresh instability for the single currency bloc. The euro has come under increasing pressure in recent weeks amid signs the European Central Bank is likely to embark on full-blown quantitative easing (QE) early next year to help boost the ailing eurozone economy. Many currency analysts believe the full effect of any QE programme is still not priced into the value of the euro.

CAD The Canadian dollar traded at almost a five-year low after a report showed the economy of the US, the nation’s biggest trade partner, surged the most in a decade in the third quarter, outpacing gains in Canada. The loonie, as the Canadian dollar is known, fluctuated amid a rally in crude oil, the nation’s biggest export. The currency had weakened earlier on in the day after a report showed Canada’s GDP grew 0.3 percent in October from a month earlier, a worse than expected result. The annualized 5 percent climb in US GDP added to speculation the Federal Reserve will raise interest rates before the Bank of Canada. This really shows that the US is beginning to diverge from other developed economies, like the eurozone and Canada.

UK news

  • FT. UK looks set to miss 3% growth forecast: Growth this year is likely to miss the government’s 3 per cent forecast, undermining the boast by George Osborne that the British economy was growing faster than any of its key rivals.
  • Reuters. UK households drive economy, current account deeper in red: Britain’s economy relied more heavily on spending by households for growth in the third quarter despite a fall in take-home incomes, underscoring the challenges of getting the recovery onto a sounder footing.
  • Reuters. UK households drive economy, current account deeper in red: Britain’s economy relied more heavily on spending by households for growth in the third quarter despite a fall in take-home incomes, underscoring the challenges of getting the recovery onto a sounder footing.