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UK GDP growth was 0.3% in November
The pound posted modest losses of below a quarter per-cent against the US dollar and the euro yesterday, as markets braced themselves for underwhelming growth data.
The UK’s GDP read for the quarter came in unchanged this morning, in line with most analysts’ expectations. That figure is down from the 0.2% GDP increase the UK recorded last quarter.
The Bank of England’s chief economist Huw Pill yesterday attempted to temper expectations of a possible cut to the base rate as early as next summer. Pill argued that the central bank’s latest models pointed to “more persistence” in the UK’s inflationary pressures than previously expected. His comments followed cautionary remarks given on Wednesday by the BofE’s governor, Andrew Bailey.
An increasing number of UK homeowners have fallen into arrears on their mortgage repayments, according to UK Finance. Data from the trade association claimed that 87,930 homeowner mortgages were in arrears of at least 2.5% of their outstanding balance in the third quarter of this year, with strains particularly evident within buy-to-let products.
Germany has asked the European Union to delay the projected £3400 Brexit tariff on electric car imports, which would significantly increase the cost of purchasing a British-made vehicle in mainland Europe.
In a speech at an IMF conference in Washington DC, Federal Reserve chairman Jerome Powell stressed that he would not hesitate to raise interest rates should inflation stay stubbornly above 2%. His comments led to an increase in the number of traders pricing in future US central policy hikes, according to Deutsche Bank.
Initial claims for state unemployment benefit in the US ticked down slightly more than expected, from 220k to 217k in the week ending November 4th. However, analysts were mixed in their assessment of the sticky ongoing claims data, with some arguing that it indicated those out of work are finding it hard to find a new employer.
Israeli prime minister Benjamin Netanyahu was reported to have declined an offer for a five-day ceasefire in the country’s conflict with Hamas in exchange for the release of numerous hostages.
Crude oil futures, which have come to serve as a proxy for the pace of inflation in some markets, have trended lower over the past weeks, partly in response to the conflict in the region. The commodity was trading at around $77 to the barrel at the close of the UK market.
European Central Bank president Christine Lagarde is due to make a speech tomorrow. Other market-moving events look thin on the ground, although there will be plenty for currency observers to sink their teeth into next week, with the US and UK both scheduled to publish their latest inflation reads.
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GBP: Pound absorbs losses ahead of GDP
Sterling softened against both the US dollar and the euro yesterday ahead of the release of UK GDP figures along with a speech from Jerome Powell on the other side of the Atlantic.
The RICS UK Residential Market Survey house price balance, which measures the gap between the percentage of respondents seeing rises and falls in house prices, rose slightly to -63 in October 2023 from -67 in September, suggesting the pace of decline has levelled-off in recent weeks.
More inflation and growth figures are due to be posted next week for the UK.
GBP/USD: the past year
EUR: ECB’s de Guindos: “We’re not there yet”
The euro gained around 0.1% against the pound yesterday while treading water against the dollar.
ECB vice president Luis de Guindos warned it was too soon for markets to start thinking about a reduction to borrowing costs. “Any discussion about interest rates is clearly premature”, he remarked in a speech yesterday.
Next week features both Spanish and Italian inflation figures, alongside the ECB’s GDP reveal.
USD: Fed officials warn inflation battle continues
The greenback continued its gains over sterling to over a cent above where it was to begin the week.
As onlookers waited for Jerome Powell’s speech last night, Raphael Bostic, chair of the Federal Reserve’s Atlanta branch, also spoke about central lending. In similar remarks, Bostic insisted that it would wait until it was sure inflation had reached 2% before it looked to reduce interest rates.
Inflation statistics and GDP numbers are due to be released by the world’s largest economy next week, along with a raft of smaller, but no less intriguing reads.
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