GDP Missed The Mark But Sterling Leads The Way

28 January, 2015

Simon Eastman

Surprisingly yesterday the pound managed to continue its run of positive sentiment as it marched on against a host of major currencies despite the key GDP growth figures missing analyst forecasts.

At 9.30am the figures came out with markets expecting an uptick in growth for the final quarter of 2014. They were disappointed though as we saw 0.5 percent QoQ instead of the 0.6 percent and more importantly the YoY figure reached 2.7 percent shy of the 2.8 percent. In addition BBA mortgage approvals came in lower too at 35,700 under expected 36,600. We would have expected the pound to falter, which it did initially after the releases came out, but with sentiment seemingly with the pound the losses were short lived and insignificant.

By lunchtime focus was with the US where traders awaited durable goods orders, but by 1.35pm and with the figures missing expectations by a large margin the dollar was falling. Ahead of tonight’s FOMC policy statement there was some expectations we could hear of interest rate rises as early and March this year for the US, but following the goods data showing a negative 3.4 percent figure opposing to expected growth of 0.5 percent the greenback took a slow nose dive off the currency cliff. The broadly weak euro took nearly 2 cents while sterling managed 1 ½ cents. The only saving grace was consumer confidence later on in trade which exceeded forecasts at 102.9 compared to 95.1.

Overnight Australian inflation figures were released showing cheap petrol has helped to drag inflation down to its lowest level in nearly 3 year to 1.7 percent. The rate last month was 2.3 percent so this is a fairly dramatic drop in rates. The recent selling of AUD and other “riskier” currencies has been pretty endemic of late with 5 percent wiped off the value in the past week alone. With the recent events in Europe investor confidence has dropped and the safe haven CHF and USD have been in favour whilst higher yielding currencies like the Aussie and Kiwi dollars have been suffering. As with many central banks at present, the RBA is also considering tinkering with interest rates to the downside but current inflation levels don’t justify a move at present.

Today is a fairly quiet day ecostats wise, with some low key Eurozone releases, the German Gfk consumer confidence survey being the best of the bunch. Today could be sentiment led again with investors eagerly anticipating the FOMC policy statement out this evening in the hope they shed further light on if and when interest rates will start going up Stateside. We also have another central bank release as the RBNZ release their policy statement an hour later at 8pm GMT, followed by trade balance figures at 9.45pm.

Plenty happening overnight so should these currencies be on your radar make sure to stay in touch with the Currency Index team!