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The UK's GDP rose in August
Sterling had a positive day against the US dollar, strengthening by around half a cent and regaining the week’s losses. There has also been some success against the euro too, with a similar rise since the start of the week.
Nevertheless, as we reach the end of the month GBP/USD has been heading for its worst month since the mini-Budget disaster last September, losing over 3%. There has been hope, however, from surprising news on the British economy just released.
This morning we have heard Gross Domestic Product (GDP) for the UK, which showed that the British economy grew slightly more than expected in the year to the end of June, at 0.6% instead of 0.4% as previously believed. Indeed, today’s GDP release from the Office for National Statistics (ONS) shows that the UK economy grew faster than other G7 rivals in 2022 and also in 2021 (with 8.7% growth).
However, economic performance grew less in the second quarter than in the first quarter.
This follows on from yesterday’s GDP for the USA which showed a slightly slowing US economy, growing at an annualised rate of 2.1% in the second quarter of 2023.
There was a mass of data yesterday from the eurozone, including Spanish inflation rising to 3.5%, albeit with core inflation, with fuel and food taken out, falling again, to 5.8%. German inflation also fell more than expected, to 4.5% (a huge drop from 6.1% last month) with core inflation also on the way down.
There were readings for consumer confidence too, with Italian business and consumer confidence, Spanish consumer confidence and eurozone-wide consumer confidence all falling.
So, it looks as though the severe round of tightening monetary policy from the Federal Reserve, Bank of England and ECB is showing its effects.
Monetary policy is having its effect on the housing market too. A report from Zoopla found that asking prices for houses are falling in the UK, with the average vendor discounting by 4.2% in September – equating to over £12,000 for an average property. In London and the South East the discount was even larger – 4.8%. Could an end be in sight to housing’s woes? The average five-year fixed mortgage fell below 6%.
Problems for property on the other side of the world too. In China, executives at Evergrande, the huge but troubled property group, have been arrested on charges of financial crimes. They include Hui Ka Yan, once said to be Asia’s richest man. At one point the company had 720,000 unfinished flats on its books.
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GBP: Pound rebounds
For once, we’re not reporting a new low for the pound against the dollar, as it staged a small come-back yesterday, taking weekly losses to just 0.75%.
Against the euro, sterling gained close to 1% between Monday and yesterday morning, before slipping back.
This morning’s GDP data appears to be having a mixed reaction, with nothing definitive emerging to end the month yet. However, there were positive signs with business investment rising far ahead of expectations to 4.1% for the second quarter of 2023. Investment in aircraft was a major feature.
Next week, we launch straight into housing data at the crack of dawn on Monday, before moving on to final results for PMI through Monday and Wednesday.
GBP/USD past year
EUR: Euro finds strength despite poor data
Yesterday was a good day for the single currency, with gains of as much as 0.75% against the yuan and a bit less against the US and Canadian dollars.
This is despite the deluge of negativity from the data readings yesterday and this morning. So far today German retail sales have taken a dive, falling by 1.2% when a rise had been expected. We’ll hear German labour market news shortly.
We’ve also heard that French prices fell in September by 0.5%, taking annual inflation to 4.9%. The ‘flash’ reading for eurozone-wide inflation in September will be out at 10am UK time.
USD: GDP disappointment drives down dollar
Falls across the board for the US dollar, as slightly disappointing GDP data put the mockers on hopes for an interest rate rise at the Fed’s next meeting.
Later today we’ll get a mass of data on business mood, but the main event of the day will be a reading for personal spending in the USA.
It’s all about the American jobs market next week, with JOLTS job openings on Tuesday and non-farm payrolls on Friday.
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