UK GDP growth holds as consumption and government spending boost economy

Claire Hogarth27/Nov/2014Currency Updates

GBP

A mixed day for Sterling saw the UK currency finish strong on the Dollar, rising by 0.5%, although down 0.2% on the Euro.

Strong levels of consumer spending enabled the UK economy to grow by 0.7% in the third quarter of 2014. The amount of household spending, of which accounts for two-thirds of overall UK output, grew at its strongest rate in four years by 0.8% over the quarter. This, coupled with an increase in government spending by 1.1%, helped Gross Domestic Product increase by an annualised 3% according to ONS. The UK economy has now expanded for seven consecutive quarters, with the OECD expecting Britain to grow faster than any other G7 economy this year on the back of strong services, manufacturing and construction growth.

A relatively quiet end to the week as far as UK data is concerned, with no major data releases in the UK today.

EUR

The Euro fell on its peers after ECB Vice President Constancio said that the bank will be able to gauge in Q1 of next year whether to start buying sovereign bonds. The single currency fell on the comments, although managed to finish 0.3% up on the Dollar after weak US data.

The European Commission yesterday outlined its €315bn investment plan aimed at kick-starting the European economy, which has stalled in 2014. The injection aims to benefit education, transport and the digital economy, and could create up to 1.3 million jobs according to the chief of the commission. Limited data out in the Eurozone on Wednesday, however, consumer confidence in Italy fell to its lowest level since February of 100.2, while the average yield on Federal Bonds auctioned by the German central bank fell for an eleventh straight month to 0.74%.

Far more activity in the Eurozone today, with the release of Germany’s unemployment data at 9am followed by inflation figures at 1pm.

USD

The greenback weakened overall against its major peers after mixed data; with the US Dollar index finishing 0.3% down for the day.

Orders for durable goods rose by 0.4% in October it was revealed yesterday. The increase in the measure, which has been volatile in recent months, was mainly down to the strength of transport equipment, which increased after two consecutive monthly declines after an upswing in aircraft and engine orders. This was so much so that durable goods excluding transportation fell by 0.9%, its greatest decline since January.

Initial claims for jobless benefits unexpectedly rose to its highest level since September, increasing by 21,000 to 313,000, although the four week moving average remained below 300,000 for an eleventh straight week. Elsewhere, personal income and personal spending increased by 0.2% in October, although both came in below forecast. Consumer spending was boosted by low gasoline prices and a strengthening labour market according to the Bureau of Economic Analysis. In a busy day of US data, the Chicago Purchasing Managers’ Index fell from October’s three and a half year high to 60.8, while the Reuters Consumer Sentiment Index came in below forecasts at 88.8.

No announcements or data releases out of the US today due to the Thanksgiving holiday.

Rest of the world

The Russian Ruble plummeted on Wednesday, falling by as much as 2% on the Dollar as hopes that the OPEC would agree to cut oil output faded. The Ugandan Shilling weakened by 1.1% on Dollar demand from importers while the Brazilian Real climbed by as much as 1% on greenback, the most of any currency, after President Rousseff’s new finance team was greeted with approval.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.