18 November 2024

GBP

GBP/USD hit a four-month low on Friday after the UK’s estimated Q3 GDP growth came in at 0.1%, down from 0.5% in the second quarter and below the anticipated 0.2%. The Q3 figure indicates that the UK’s economic growth is almost at a standstill.

Economists have suggested that the Labour government’s messaging on the economy, together with its tax hikes and increased borrowing, have contributed to declining business and consumer confidence.

Monetary Policy Report Hearings will take place on Tuesday, when the Bank of England’s Governor Andrew Bailey and other MPC members will testify before Parliament's Treasury Committee on inflation and the economic outlook.

UK CPI is out on Wednesday, with the MoM figure expected to rise from 0.0% to 0.5%, and the YoY figure expected to increase from last month’s 1.7% to 2.2%. While these anticipated rises are positive, UK Retail Sales data will arrive on Friday, and that is expected to fall from last months figure of 0.3% to -0.3%.

EUR

Following the release of American inflation data on Wednesday, the euro further declined against the US dollar. On the same day, US Republicans won a majority in the House, and gained control of Congress. The increasing likelihood of President Elect, Donald Trump’s policies being enacted has added to conversations surrounding inflation risk, which are pushing up US government bond yields and  contributing to US dollar strength.

When it comes out on Tuesday, the eurozone’s CPI YoY for October is expected to remain at 2.0%. Markets have fully priced in the 25-basis point cut the ECB is expected to deliver at its 12 December meeting.

A raft of PMI data for the eurozone, as well as for the UK and US, is also due this week. Manufacturing and Services PMI data in the eurozone is forecast at 46.0 and 51.6. In the UK, it is expected to be 50.1 and 52.3, while US manufacturing is forecast at 48.8 and services at 55.3.

Starting on 18 November, the Rio summit of the G20 aims to build “a fair world and a sustainable planet”. But leaders of major economies will be bracing for a shift in the global order with the return to power of Donald Trump. Discussions about trade, climate change and international security may well clash with the president-elect’s promised policy changes, including the threat of US tariffs.

USD

With high US Treasury yields and a more restrained outlook for rate cuts, the USD looks likely to extend its bull run.

American markets have adjusted their rate cut expectations after Jerome Powell’s hawkish comments emphasised strong economic performance. As other FOMC members echoed Powell’s tone, markets began to price in a December rate cut by the Fed to 4.5%.

The US Consumer Price Index came in on forecast at 2.6% YoY and MoM at 0.2%, and the Producer Price Index for October came in slightly above the 2.3% forecast at 2.4% YoY.

According to the US Labor Department, initial jobless claims fell by 4,000 to 217,000 in the week ending 9 November. This is their lowest level since May, and new claims are now below the average of the past two years. 

This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.