UK Q3 growth figures beat expectations
27/Oct/2010 • Currency Updates•
Investors kept their focus on sterling on Tuesday as the big news out of the UK was that although Britain’s growth slowed in the third quarter to 0.8%, it was far less than expected from the previous quarter as robust construction output and services underpinned recovery. The better-than-expected momentum in the economy is likely to delay another tranche of quantitative easing, boosting sterling across the board.
Additionally, the ratings agency Standard & Poor upgraded the UK’s rating from negative to stable, reaffirming the UK’s gold-plated triple A status, prompting George Osborne to declare a ‘double dose of good news’. He went on to say that ‘Britain is growing, growing strongly, the strongest growth we have seen in this part of the year for a decade, and also our country’s credit rating is being secured… a big vote of confidence in the UK, and a vote of confidence in the coalition government’s economic policies.’
The euro fell sharply versus the sterling and came under modest pressure against the dollar on Tuesday, after data showed the UK economy is in better shape than feared as the nation enters a period of severe budget cuts. Investors continued to pare long bets on the Eurozone single currency ahead of a key Federal Reserve meeting next week.
The dollar showed signs of life against most majors on Tuesday, but fell sharply against the sterling on better-than-expected growth data from the UK. Still, with Federal Reserve widely expected to expand its balance sheet in support of the economy in November, the dollar’s gains were muted.
Confidence among US consumers improved by more than economists had been expecting in the month of October, according to a report released by the Conference Board on Tuesday, with the increase coming as consumers were less pessimistic about the outlook for the next six months. The Conference Board said its consumer confidence index rose to 50.2 in October from a revised 48.6 in September. Economists had been expecting the index to edge up to 49.0 from the 48.5 originally reported for the previous month.