UK GDP hit by strikes and rain
UK economic data is a bit of a roller coaster at the moment. Having seen upward revisions to the economic growth data for the end of 2021 and the positive impact that had on Sterling, this morning bought disappointing data for July 2023. Strikes by public sector workers in the health service and in schools dragged economic output down in July and the persistent rain did nothing to help the construction and service sectors. The net result was a contraction of 0.5% in the month of July and that brought the annual growth rate back to zero. The only bright spot in this morning’s data is that manufacturing production grew by 3% in the year to July and that was better than forecast – we also heard yesterday that the UK has moved above France to become the 7th largest manufacturer in the world. You won’t see that positive news published in the mainstream media. Unfortunately, that wasn’t enough to support Sterling in early trade today. The pound is down by half a cent against the US dollar to $1.2450 and by a similar amount against the euro. The GBP/EUR rate is down to €1.1595 at the time of writing. That’s the lowest it has been in a month. It is a similar story elsewhere; the GBP/CAD rate is down to CAD 1.6890, GBP/AUD is at AUD 1.9435 and the GBP/NZD rate is down to NZD 2.1115. There is every chance sterling will bounce back from this knee-jerk reaction. After all, one month of washout is not a summer break. We will also have the GDP estimates from the NIESR later on and those are forecast to be slightly more positive. GBP buyers may wish to take advantage this morning.
USD steady – CPI data due
The first substantial US data for this week arrives at 13:30 hours this afternoon. The US Consumer Price Index is expected to push a little higher in this August data. The markets are expecting a 3.6% annualised rate. The big question is whether that colours the thinking of the US Federal Reserve as they contemplate their next interest rate decision. The next announcement on that is due on the 20th of September and there is very little consensus on what we should expect from that meeting. Estimates vary between no change at all and the expectation of a 50 basis point interest rate rise from some at the hawkish end of the scale. For now, The US dollar is holding on to its recent strength. GBP/USD is down to $1.2450 and the EUR/USD rate is steady at $1.0730.