Sterling was unchanged this morning despite a downward revision in Q3 GDP indicating the economy has less momentum going into the last months of the year than previously thought. GDP in the final quarter of the year is likely going to slow as the surge in Covid-19 infections weighs on consumer sentiment, although the government hasn’t tightened measures further such that they’re too economically stringent. Q3 growth was revised down from 1.3% to 1.1% QoQ, primarily driven by downward revisions to government spending and business investment. Consumer spending was revised upwards but this was more than offset by the other subcategories. The lack of market reaction comes as Prime Minister Boris Johnson ruled out stricter pandemic rules before Christmas, sparking optimism after speculation that Britons’ festive plans would go up in smoke. With the GDP data being out of the way, this means only one data release is left on the agenda for the UK before year-end, which is house prices on December 30th.
The euro exhibited a mild rally in yesterday’s session but continued to trade in a relatively limited range. This morning, with absolutely nothing of interest scheduled in the data calendar, the euro sits in the red against both the dollar and the pound. News of further tightening in France and Germany is making the rounds in the financial media this morning, but have been known to markets since at least yesterday and are therefore unlikely to be driving today’s price action. With little pencilled in for the rest of the day, the focus will rest on broader risk sentiment and the direction of year-end flows as liquidity starts to exit the market.
The broad dollar sat under pressure for the first time this week in yesterday’s trading session as market risk sentiment was better supported, however, the DXY index is yet to show a material step down due to the greenback’s rally against the Japanese yen yesterday which negated much of the downside seen against the rest of the G10 in the index. The main news out of the US has been on the virus front, with President Biden opening up new vaccination centres and making 500m rapid tests available as of January as he issued a stark warning for the unvaccinated. Today, the dollar has started the session on a mixed footing, with just the third reading of Q3 GDP scheduled for release at 13:30 GMT.
Crude oil prices reversed course yesterday after they reached lows not seen since the beginning of the month on Monday when Covid concerns weighed on risk sentiment. Gains in WTI have extended this morning, helping to support the loonie retrace after it touched a fresh year-to-date low at the beginning of the week. The Canadian dollar is one of the better performers against the US dollar for this reason this morning and the move is shared among other petro-linked currencies like NOK and RUB. For today, focus will be on EIA US oil inventories data which will be released at 15:30 GMT before tomorrow’s release of October’s GDP finishes off the data calendar for the year.