GDP numbers for the UK beat expectations

There was mixed data out of the UK yesterday. On the one hand we had GDP figures coming in hotter than expected – YoY figure achieved the consensus of 3.2%, and the UK economy has grown 0.9% (YoY) in Q2 of this year, which ultimately points at an economic recovery, says the ONS. However, the Sterling current account data was released yesterday for the UK, which measures the difference in value between exported and imported goods and services during the reported month, which unfortunately fell to a figure of -23.1B from a previous -20.5B. This is deemed negative for GBP as these figures are a reflection of how the UK economy is commercially interacting with the rest of the world as foreign businesses must buy the domestic currency to pay for the nation’s exports. GBP/EUR dipped down to 1.2788 IB when this information was released; however, the pairing retraced its steps back towards two year highs and peaked to 1.2873 IB. Later in the week we will see the release of manufacturing, construction and services PMI so expect a busier end to the week from the UK.

More negative news for Europe as inflation figures depreciated again in September, with prices rising at the slowest rate in five years. The problem the economy now faces is the fear(s) of a deflationary spiral that could take a long time to unwind. The YoY figure dropped to 0.7% from a previous 0.9% while the unemployment rate remained unchanged at 11.5%. Germany achieved a positive uplift in their retail sales figures for the month of August as the economy announced a 2% improvement from July's figure coming out at 2.5%. Unfortunately, the negative inflation readings overpowered this information and the dollar hammered the struggling economy yesterday as EUR/USD fell to 1.2568 IB which was last seen back in August 2012. It will be very interesting to see if Mario Draghi (ECB President) will start to talk up the strength of the euro at his speech on Thursday also covering the ECB’s interest rate decision.

In the US, confidence amongst consumers unexpectedly declined in September to a four-month low as Americans have a strong view that the labour market has deteriorated. The index decreased to 86 from a previous 93.4 which was the strongest since October 2007. Now sentiment may have trouble advancing to higher levels without faster income growth that’s sustained overtime. It will be a busy week for the US as we have manufacturing, trade balance and unemployment figures out between today and Friday. The Scottish referendum is now beginning to be old news and Sterling is starting to lose its value made against the Greenback two weeks ago as the currency is now trading in line with negative and positive fundamentals from benchmarking economies - the pair traded at daily low of 1.6162 IB yesterday.