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October 2015

Daily Currency Insight

Published: Wednesday 28 October 2015

The UK economy slowed down in Q3. The 0.5% preliminary calculation of the growth rate was below expectations and the Pound slipped a little but it should be noted that the 1st estimate, which was published yesterday is calculated on just the output side of the economy and that is only about 40% of the total dataset. Annualised growth is likely to be better than the 2.3% released yesterday when the next; more complete, set of figures is released in a week or two and that will include the effects of the recent strong retail sales numbers. The Pound gave up some of its gains but remained well supported. This morning's report from Lloyds Bank showing a drop in consumer confidence won't help Sterling but it is at odds with the retail sales data, so maybe it will have less impact.  
U.S. new home sales fell 11.5% last month to 468.000 units from a revised figure of 529.000 units in August. This was much poorer than forecasters had predicted but other US data was also mixed. The consumer confidence index was far worse than expected. The analysts and experts had predicted an index reading of 103 but the actual number was just 97.6. However, the durable goods orders not as poor as the markets had predicted; albeit still in negative territory. With such disparate data, it is no surprise that the US Dollar stand in the middle of its recent range. That's a clear sign of indecision.  We will see more of that this evening when the Federal Reserve is going to leave their base rate on hold. Whether they will give more clues on the timing of the first rate hike since the recession is open to debate but their every word will be scrutinised. 
Overnight we saw a drop in the pace of Australian consumer price inflation. At 0.5% in the three months to September, the rate was much lower than forecast and it raises the real possibility the Reserve Bank of Australia will feel impelled to cut their base rate when they next meet. The Australian Dollar reacted by losing 4 cents against the Pound in the last 24 hours and there is a strong chance we will see further losses in the days ahead. 
Tonight brings the New Zealand interest rate decision when the RBNZ meets. There is little chance of any change to the RBNZ's 2.75% base rate but their rhetoric of late has been quite ebullient. We will be looking to see if they have softened their tone and, if they have, the NZ Dollar is going to weaken. They may be encouraged by China easing its monetary constraints but the weaker Australian data will worry the RBNZ. Australia is New Zealand's main export market after all. 
The Euro is on the back foot after ECB Board member Benoit Coeure, suggested there is a distinct possibility the central bank may cut its deposit rate and take other actions to boost the money supply and – hopefully – economic activity as well.  On cue, German consumer confidence fell for the 3rd straight month. As an index, it is still in positive territory but the level of confidence is on the slide. Clearly, that is only one country in the 19 nation currency sharing bloc but it is the largest by far; hence its significance.
And in Indiana, a hunter on the search for wildfowl was on the wrong end of the buckshot. She was shot in the foot after she laid her loaded shotgun down for a moment and her dog managed to stand on the gun, firing it and hitting her foot at point blank range. She has severe injuries and it isn't a laughing matter in any way whatsoever but her dog's name is. He is called Trigger. 


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