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GDP slowing everywhere – Sweden and Switzerland included

This morning started with two sets of economic growth data. Sweden published Q3 GDP growth of just 0.6% (down from 1.4% in Q2) and that brought the annual growth rate down to 2.5% from 4.2% previously. An hour later, Switzerland announced an annual growth rate of just 0.5%, much worse than the Q2 rate of 2.2%. So, the global slowdown is being felt across the board. Both the SEK and CHF are weaker after the news. The GBPSEK rate dropped to SEK12.54 overnight but is back up to 12.63 this morning and GBPCHF rate has bounced from the overnight low of CHF1.1340 to just above 1.14. We will see GDP data from Canada this afternoon and the US tomorrow. It will be interesting to see if the theme is repeated there.

USD bounce runs out of steam

US traders, returning after a 4 day break, saw a weakened US dollar and bought quite heavily on Monday. That USD rally ran out of steam overnight though and we see GBPUSD back above $1.20 this morning, having been as low as $1.1940 at one point yesterday. The EURUSD rate threatened to break $1.05 at one point yesterday but, having dived to $1.0330 late yesterday, it is back up to just below $1.04 this morning. There is a lot of talk that, unless that pair gets back above $1.0450 soon, we could see further downside. We could well see this afternoon’s release of the US consumer confidence index show it below 100 for the first time since July, i.e. pessimism rather than confidence. That would influence the Federal Reserve’s thinking on rate hikes. Maybe they’ll feel like they have broken the spirit of consumers and inflation may start to fall but we shall see.

Canadian GDP should confirm slowdown

The Canadian dollar tracked its US counterpart for most of the day yesterday and overnight. The GBPCAD rate touched CAD 1.63 at one point but is down to 1.6140 this morning after a deeper dive overnight. This afternoon’s Canadian economic growth data could further damage the loonie though. We are expecting, as with this morning’s Swedish and Swiss data, a drop in activity in Q3. Many believe the annual growth rate will more than halve, from 3.3% in Q2 to just 1.5% in Q3. So don’t be surprised if the GBPCAD rate rises later in the day and it may do that rather quickly if the data is worse than forecast. Obviously, anything better than these numbers will have the opposite effect but the influence of the USD on the Canadian dollar is always in the background.

Sterling Braced for BOE speech

The governor of the Bank of England, Andrew Bailey will deliver a speech this afternoon a fortnight ahead of the next Bank of England interest rate announcement. Earlier in the day, we will have a speech from Dr Catherine L Mann, who is a member of the Bank’s Monetary Policy Committee and Dr Mann has been known to pre-empt the MPC announcements with hints of policy change. So, although the pound is holding on well on major exchange rates, it will be susceptible to sharp adjustments throughout the day today. That is especially true as we have no other UK data to clarify things. So, although the GBPUSD rate is still up around $1.20, the pound has dropped 2 cents agsinst the Australian dollar and the Kiwi dollar overnight. GBPAUD is down to AUD1.7880 and GBPNZD is down to NZD1.93 this morning. Be aware that, if anything untoward comes from these speeches, and that is highly likely, we could see further declines in these pairs.

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