UK data broadly supports Sterling
This morning started with a barrage of UK data. Sadly, some of it was a little disappointing. A quick run-through shows the economy grew just 0.1% in the month to August and construction output grew 8.6% in the year to July. That was 20% lower than expected. The only bright spots were industrial production which was up 1.2% in the month to July and that brought the annual rate up to 3.8%. That was significantly better than market forecasts but a £12.7 billion trade deficit in July was greater than June and worse than forecast.
The net result was oddly positive for the pound which had declined a little in the early trade. The GBPUSD exchange rate is up to 1.3860 this morning. There is US dollar buying interest here but a push up to 1.39 seems fairly likely. The USD is displaying some weakness in other areas as well. The EURUSD exchange rate is pushing up again to the top of its recent range at 1.1850. Whether we will see that level break and 1.19 being targeted is a moot point at this stage.
Euro on the back foot after mixed data
The GBPEUR rate rose yesterday, breaking out of its very tight trading range to spike to 1.1730 at one stage. This rate dropped back to just below 1.17 ahead of this morning’s data but is above 1.17 again as I write. This morning’s disappointing industrial production numbers from France and Spain won’t have helped the euro and we have a smattering of other EU data to contemplate. Italian industrial production, Greek and Portuguese inflation data, and the start of a Eurogroup meeting, should all have an influence on the euro as the day progresses.
Canadian employment data forecasts are positive
The Canadian dollar has been lively. A spike to 1.7560 in the GBPCAD exchange rate leveled out to 1.7500 this morning ahead of today’s Canadian employment data for the month of August. The forecasts are very strong, 100,000 fresh jobs being created and a 7.3% unemployment rate at the target levels as far as markets are concerned. Anything better or worse than these figures is likely to cause more Canadian dollar volatility.
The same was true of the US weekly jobless data. 310,000 new claims were filed last week, significantly fewer than the market forecasts. However, the US dollar is still under pressure due to the mixed messages coming from the Federal Reserve. USD traders remain unsure as to when the US Fed will start to reduce its bond-buying programme in the so-called ‘tapering’ maneuver and what their pace of change is likely to be.
We have witnessed strong producer price inflation from around the world this week and we get the US PPI data this afternoon. the market forecast for core PPI in the month of August is just 0.5%. Judging by the Chinese and other data we have seen recently this may be an underestimation. Anything more than a 6.6% annual rise is likely to strengthen the USD and prompt further talk of tighter monetary policy in the Fed.
And the interesting fact of the day is that the term, ‘quisling’ is well known as defining a traitor or turncoat but the origin is perhaps less well known. Norwegian, Vidkun Quisling was sentenced to death by firing squad on this day in 1945 for acts of high treason, murder, and embezzlement when he collaborated with the Nazis, helping them when they invaded Norway in 1940.
Not the happiest note to end on but interesting, nonetheless.