UK Chancellor lifts growth forecast and cuts some taxes

The UK chancellor of the exchequer, Jeremy Hunt, delivered his autumn statement yesterday. There was the expected smattering of tax cuts, some tinkering with allowances and an increase in the chancellor’s forecast for UK growth to 0.7% in this financial year. Sterling had fallen quite heavily against the US dollar ahead of his statement but it has bounced back relatively well. Currently, the GBP/EUR rate is around $1.2520 and the GBP/USD rate is hovering just below €1.15. Sterling traders will turn their attention to this morning’s UK purchasing managers indices (PMIs). Generally speaking, the forecasts are marginally stronger than the previous months. If the data pans out that way, the markets will remain largely unchanged, especially as the US markets are on Thanksgiving holiday today, taking some of the volume out of the forex trading.

Euro awaits PMIs

We will see PMIs from Europe as well today. Although, as with the UK data, the forecasts are reasonably positive, the early releases of French PMI data missed the forecasts. However, the German numbers were marginally above forecast, albeit still in the negative zone, below 50. By the time you read this, the eurozone PMIs will have been released. The euro’s day is going to be shaped by that data. As at now, the GBPEUR rate is just below €1.15 and the EUR/USD rate is around $1.0920.

NZ retail sales data due overnight

The GBP/NZD rate has been bouncing between NZD 2.06 and NZD 2.08 with the occasional spike to NZD 2.09 but it has been a fairly sideways pattern for the last month. That may change overnight when we receive New Zealand’s retail sales data. The markets are forecasting 4th quarterly contraction on the trot, albeit a slightly smaller drop than the second quarter contraction of 1.0%. The forecasters are also expecting a 1.5% contraction in core retail sales, excluding cars and fuel. The Reserve Bank of New Zealand and the New Zealand government have a lot to do if they are to restore some growth to the economy without stoking inflation and it is the speculation over their reaction to that dilemma that will drive the value of the Kiwi dollar tomorrow. Right now, the GBP/NZD rate is reasonably static around NZD 2.0650.