Markets remained relatively quiet despite strong US GDP figures

Tom Tong30/Aug/2013Currency Updates

GBP

Britain’s economic growth continues to gather pace as the sterling strengthened to its highest level in 3 weeks against the euro. Positive UK data including consumer credit and mortgage approvals are to be released at 8.30am, which could see sterling strengthen.

Though Carney remained dovish in his speech on Wednesday, the markets are taking heed of the improving growth profile of the UK. Sterling has strengthened at least 0.6% against all 16 of its major peers this month; despite the pound weakening against the dollar yesterday. This has also had an effect on the 10-year gilt yield which hit a 2 year high of 2.827 percent.

UK Nationwide Housing prices have been released this morning, where we saw a fall of 0.3% on last month’s performance of 0.9% MoM, alongside a corresponding fall in YoY figures from 3.9% to 3.5%. GDP increased 0.7% over 0.6% as estimated.

There are no other significant data releases from the UK today.

USD

The dollar strengthened yesterday against the pound, the euro and most major currencies as data released from the US showed the country’s economy has accelerated quicker than anticipated in the second quarter, growing 2.5%, influenced by an increase in the country’s exports. The greenback’s appreciation was further supported by a reduction in US job claims to a seasonally adjusted level of 331,000 – falling by 6,000, as opposed to the anticipated level of 5,000.

The dollar is currently considered a safe-haven asset by investors, with a US led military intervention in Syria a possibility in the coming weeks. In addition, US Treasury yields, having fallen recently, increased as investors sought refuge in the low-risk government debt instruments.

There are no significant data releases from the US today. Monday is a bank holiday for the States as they celebrate Labour Day.

EUR

Positive data from the United Kingdom has damaged the euro’s standing this week, with the Euro is down 0.5% against the pound, having hit a three week high on Wednesday. The euro has so far dropped 2.3 per-cent against the pound this month. Less positive data from the US saw the dollar go lower against the common currency last week, with EUR/USD touching its highest level since February, before dropping back to more familiar levels after poor German unemployment and low inflation figures were released earlier in the week.

As a result EUR/USD was down 110 pips yesterday, after this negative data combined with positive US releases, the worst one-day loss since 2nd May. Poor German retail sales figures released today have worsened the outlook, coming in -1.4 per-cent under expectations, with 0.5 per-cent growth expected.

There is little Tier 3 data being released from the Eurozone today, with Italian Unemployment for July expected at 12.2 per-cent and Eurozone consumer confidence expected at -16.5.

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Written by Tom Tong

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