It was a tale of two GDPs yesterday with the US’s gaining and the UK’s surprising to the low side; the inevitable of course happened to the GBPUSD cross.
While US GDP did rise to 2.6% it did not get up to the 2.8% consensus mark that analysts had expected. Housing data was also poor out of the US and analysts expect, much like here in the UK, US house prices to shrink by as much as 10% next year. Some Washington lawmakers have began to call for measures to bring down interest rates and reduce principles in order to elevate demand. The problem at the moment seems to be supply is still too thick and swamps any demand recovery too quickly, driving down prices.
As we said, UK GDP was also somewhat disappointing yesterday as it slipped to 0.7% from a previous of 0.8%. There were some bright spots as construction spending and business inventories both expanded by a juicy amount suggesting that sentiment in those sectors is not quite as poor as some had thought. The fall does lead to fears however, that the imposition of austerity measures couple with the recent bad weather will lead to further missed expectations moving into 2011. Sterling slipped on the news down to its day’s low of 1.5356
The fall was tempered by the minutes from the Bank of England’s latest meeting where a number of members expressed their expectation that CPI will increase in the early part of next year (something we’re have been saying for 9 or so months now). The voting record remained at 7-1-1 with Sentance asking for a 25bps increase in interest rates while Posen banged the drum for a £50bn increase in QE. This record will not likely change until Feb with the next inflation report.
In Europe, rumours flew around following an article in a Portuguese newspaper suggesting that China was willing to buy EUR6bn of Portugal’s debt; equal to half of its borrowing needs next year. Chinese officials declined to comment and we have to wonder what is in it for the them? The last time they bought up a large amount of European debt was on the proviso that details of the bank stress tests that were taking part at the time were published. It could just be a rumour although I doubt it.
After the deluge of data yesterday we are back to the Christmas pace with only US Durable Goods Orders of note.
This is the last Morning Update of 2010 so may I say thank you very much for all the feedback and support throughout the year and I hope to see and speak with you all in 2010. From myself and Georgia we wish you a merry Christmas and a very happy New Year.
| Indicative Rates | Sell | Buy |
| GBPEUR | 1.1728 | 1.1757 |
| GBPUSD | 1.5370 | 1.5395 |
| EURUSD | 1.3088 | 1.3108 |
| GBPJPY | 127.56 | 127.84 |
| GBPAUD | 1.5321 | 1.5344 |
| GBPNZD | 2.0611 | 2.0645 |
| GBPCAD | 1.5553 | 1.5582 |
| NZDUSD | 0.7445 | 0.7469 |
| GBPZAR | 10.40 | 10.45 |
| USDZAR | 6.7528 | 6.7897 |
| GBPPLN | 4.6604 | 4.6863 |
| EURJPY | 108.62 | 108.88 |
Rates are dependent on amount transacted.
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