US economy grows at fastest pace in a decade

Enrique Díaz-Álvarez24/Dec/2014Currency Updates

GBP

Sterling fell against the strengthening Dollar on Tuesday, depreciating by 0.4% against its US counterpart.

The UK economy grew more slowly in the past year than had been previously forecast according to the ONS. Revised figures show Gross Domestic Product (GDP) in the third quarter of this year was 2.6% higher than at the same time last year, down from an earlier estimate of 3%. The UK’s GDP grew by 0.7% in the third quarter of the year, down from an estimated 0.9%. The economy is now only 2.9% higher than the previous pre-recession peak.

EUR

Tuesday saw little movement in EUR/GBP, although the single currency declined by 0.45% against the Dollar.

Italian retail sales were flat in October for the second month running, data revealed on Tuesday, showing an ongoing stagnation in consumer demand. Sales were down 0.8% in unadjusted year-on-year terms in October, the sixth straight fall, following a 0.6% decline in September which was revised from a previously reported 0.5% drop.

USD

The greenback showed broad strength yesterday, climbing against almost all of its major peers, with the US Dollar index finishing 0.35% up during the course of the day.

The US economy grew at its quickest pace in 11 years in the third quarter, the strongest sign yet that growth has decisively shifted into higher gear. The economy expanded at a 4.6% rate in the second quarter. It has now experienced the two strongest back-to-back quarters of growth since 2003. Economists polled by Reuters had expected growth would be raised to a 4.3% pace. While the pace of growth will likely slow in the fourth quarter, a rapidly strengthening labour market and lower gasoline prices should provide the economy with sufficient momentum in 2015 and keep the Federal Reserve on course to start raising interest rates by the middle of next year. Elsewhere, Durable Goods Orders fell by 0.7% in November while Personal Income and Personal Spending both increased on October data by 0.4% and 0.6% respectively.

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Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.