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GDP has led market movements in the past 24 hours
Sterling fell against most major currencies yesterday, with the notable exception of the US dollar, which itself dropped across the board following a disappointing final reading for US Gross Domestic Product (GDP).
The US economy grew by an annualised 4.9% in the third quarter of 2023 – a stellar performance compared to some leading economies, but disappointing nonetheless, and another indicator that interest rate cuts are likely to come sooner rather than later in 2024 from the US Federal Reserve.
The same thought has been weighing on sterling in the latter part of this week, following the sharper than expected drop in UK inflation.
If there is one industry that has not brought glory on itself in 2023 it has been economic forecasting, and analysts have been woefully inaccurate this morning too. Overnight and this morning we have had readings for car production in the UK, retail sales and, like the USA yesterday a final result for Q3 GDP.
Retail sales were far better than expected – growth of 1.3% in November – but GDP was revealed to have been slower in Q3 than originally believed – indeed a drop of 0.1%, leaving the UK potentially in recession already, and certainly on the edge.
In the business news, more positively for British chancellor Jeremy Hunt, he signed a financial services deal intended to improve British firms’ access to the Swiss market. It will make it easier for some British financial advisors to work in Switzerland too.
Coming the other way, meanwhile, the government has climbed down over its plan to increase the minimum income needed to bring a foreign partner or spouse to the UK. It will now climb from £18,600 to £29,000, rather than the £38,700 announced three weeks ago.
Good news to finish the final currency note before Christmas; the UK’s largest ever grape harvest. The 943 vineyards in the UK, mainly based around southern England, produced 22 million bottles. An almost perfect year for weather combined with an increase in the amount of land set aside for vines meant that almost twice as many bottles were produced compared to last year.
Cheers, and Happy Christmas!
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GBP: Pound falls against all but dollar
Sterling fell against just about all but the US dollar yesterday, taking it close to 2% down on the week compared to the various non-US dollars and Scandinavian currencies.
Less of a drop against EUR and USD (around two thirds of a cent), and GBP/EUR remains above where it spent most of the autumn, while GBP/USD approaches Christmas 2023 more than 4% up on Christmas 2022.
Following this morning disappointing GDP result for Q3, taking the UK to the brink of recession, there will be no significant data release now until the start of 2024.
GBP/USD past year
EUR: Euro bounces back
The single currency strengthened against the pound and US dollar yesterday, although the gains were fairly modest.
It will be a busy end of the week for data, with business confidence readings for several European economies, plus Spanish GDP.
While much of the UK may be shutting down for the holiday period, there will be some interesting and potentially market moving data next week in the eurozone, including French unemployment and Spanish inflation.
USD: Dollar drops into Christmas
Steep falls across the board yesterday for the dollar as the US economy appeared to be slowing down.
There are some data releases this afternoon, including Personal Consumption Expenditures (PCE), before things slow down, although not stop, next week.
On Boxing Day there will be some housing data, including some house price indexes.
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