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January 2017

Sterling up on strong Gross Domestic Product (GDP) data

Published: Friday 27 January 2017

  • Sterling up on strong Gross Domestic Product (GDP) data
  • USD awaits GDP figures – forecast is poor

UK Prime Minister, Theresa May, is in Washington today to meet the new US President. There will be a lot of old tosh about whether either of them refers to the relationship between the UK and America as ‘Special’, but the nitty gritty is whether there is a trade deal to be done between ‘Our two great nations’. I am sure there is a deal, but the weighing of advantage is the key. Either way, the Pound is in rude health this morning after much stronger than expected Q4 economic growth; debunking the negative forecasters. With the Q4 growth of 0.6%, the UK economy is now 8.7% larger than it was pre-2008 crisis. That’s a sobering thought when you consider all the headwinds it has faced. The British Banking Association (BBA) data showed mortgage approvals at a nine-month high in December; adding to the confidence in the Pound.
 
We will get US GDP data this afternoon and that is expected to show a slowdown from the Q3 3.5% growth level. Something around 2.0% is forecast and the US Dollar is a little weaker as we head towards that 13:30 GMT release. This afternoon also brings US Durable Goods data which, by way of contrast, is forecast to have improved from the December number. No one ever said this stuff would make sense.
 
EU news surrounds fears over the inability of the EU and Greece to reach a debt agreement and rumours that the European Commission is working with the European Central Bank (ECB) to produce a sort of Euro-bond. This is something the German authorities have long resisted. The ominously titled, ‘European Safe Bond’ will face stiff opposition, but it is only at the ‘white paper’ stage.
 
And a teacher in America has been suspended after showing a video on the classroom wall of Donald Trump’s inauguration before pulling out a water pistol and shooting the President’s image while shouting “Die, Die!”. The video clip has been seen on social media, but there is no evidence that there were any pupils in the classroom at the time. On that point:
 
Dear Mr Trump,
If you tax Mexican goods coming into America, American consumers are going to pay the tax. Can you explain, please, in what way Mexico would be paying for the wall with that policy?
Yours,
Sane people.
 

Bar Job


A donkey walks into a bar and asks if they have any work. “Wow,” says the landlord. “A talking donkey! You should try the circus.” “I did,” says the Donkey, “but they don’t need barmen.”

 

Today's Major Economic Releases
 

Market BST Data/Event Previous Expected
EUR All Day EU: The Economic and Financial Affairs Council (ECOFIN)    
EUR 09:00 EU: M3 Money Supply year-on-year 4.8% 4.9%
EUR 09:00 EU: Private Loans year-on-year 1.9% 2.0%
USD 13:30 US: Advance Gross Domestic Product (GDP) 3.5% 2.1%
USD 13:30 US: Advance GDP Price Index 1.4% 2.1%
USD 13:30 US: Core Durable Goods Orders month-on-month 0.6% 0.5%
USD 13:30 US: Durable Goods Orders month-on-month -4.5% 2.7%
 
Daily Currency Analysis by David Johnson
 
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