USD steadies on strong Q3 GDP

In the first estimate of US economic growth in the third quarter of the year, the data was significantly stronger than expected. The 4.9% quarterly growth rate is nearly half a percent stronger than the markets had forecast and more than double the growth seen in Q2. So, although there was a larger jump in initial jobless claims than the markets had hoped for, The US dollar was back in demand and we saw a little dollar stabilisation across the board. The GBP/USD rate he’s down to $1.2120 this morning and the EUR/USD rate is down to $1.0555. we have seen escalation in the Israel / Hamas conflict as US forces have targeted Iranian-backed sites and Iran has warned that any further escalation will involve Iran targeting the US. As yet, that hasn’t strengthened the USD in the usual way but it is one to watch. Also worth watching as an inflation indicator is this afternoon’s US PCE price index. The Fed watches it closely and it does appear to be sliding, placing less pressure on the Fed to maintain tight monetary control.

Euro largely unaffected by ECB ‘on hold’ decision

It came as no surprise to anyone that the European Central Bank left their base rates on hold at 4.0% and 4.5% when they met yesterday. The vote was a unanimous one but Christine Lagarde continually suggested that the ECB was watching data to determine what their next moves were. No surprises there either. Eurozone inflation is still well above the ECB target of 2% even though it fell to 4.3% in September, down from 5.2% in August. Clearly there is still a long way to go. There is no significant eurozone data due today, so we can expect range trading around the current levels of €1.1480 against the pound and $1.0555 against the US dollar.