- UK Gross Domestic Product (GDP) forecasts revised down
- Sterling down against all major currencies
- Day One of the three day Jackson Hole Symposium is underway
By Joe De Berniere
The British Pound dropped to an eight year low against the Euro yesterday, as the single currency was boosted by robust economic data – while the UK still faces Brexit uncertainty.
The Pound fell close to 1.08 as it continued its recent slide, which has now taken it beyond previous post-referendum lows. This came as French and German manufacturing and services data beat expectations. European manufacturing export orders are now growing at their fastest pace for six and a half years and only signals the continuation of the recent strong performance of the Eurozone economy. This contrasts sharply with the picture in the UK, where inflation has outpaced wage growth in recent months and UK Gross Domestic Product (GDP) forecasts have been revised down as gloom over Brexit gathers once more.
Today’s UK’s Second Estimate GDP provided further evidence that the UK economy is not growing as fast as markets would like, with a slowing of growth that was more dramatic than expected for the second quarter of 2017. Figures came in as expected with no movement at 0.3%, so no help for the Pound from these results.
The Confederation of British Industry (CBI) Distributive Trades Survey results were also disappointing, showing that UK retail sales fell throughout 2017 so far, dropping at the quickest rate for over a year. Rising inflation has been cited as the main reason, given its constricting effects on consumers’ pockets. There has also been a considerable drop in orders, a slowing of online sales growth and a reduction in wholesale sales volume growth. Employment in the sector has fallen at the fastest pace in eight years, and a similar drop is expected for September. However, while this adds further weight to the gloomy cloud over the Pound, retailers anticipate better results in September and expect orders to pick up again.
Speaking in Germany, European Central Bank President, Mario Draghi, issued a staunch defence of the Eurozone’s loose monetary policy. He did not signal that the ECB might begin tapering off its €2 Trillion asset purchase programme and move towards raising interest rates soon. Draghi rejected the idea that negative interest rates and Quantitative Easing (QE) by central banks have distorted financial markets and done more damage than good to economies.
The Pound was also down against its other major currency partner, the US Dollar, below 1.28 for the first time since the end of June. US New Home Sales data that fell short of the forecast didn’t appear to help the US Dollar.
This afternoon we have US Unemployment Claims data, which is expected to be $237,000.
Today marks Day One of the three day Jackson Hole Symposium, where Federal Reserve Chair, Janet Yellen, and ECB chief, Mario Draghi are set to deliver speeches on the outlook for monetary policy and interest rates. All eyes will be on these speeches for indications of economic health, future policy and what this means for currency markets, corporate and personal finances. Watch this space…