Euro Strengthens Amid Weak Dollar, Pound Boosted by GDP Data

Market Reviews

The British pound rose after data from the Office for National Statistics reflected the acceleration of GDP growth in Britain in July, but further growth was restrained by unjustified forecasts of industrial production data. UK GDP grew 0.3% mom in July, above expectation of 0.2% mom. For the three months to July, GDP grew 0.6%, met expectations. The three month growth rate was the highest since August 2017.

UK industrial production fell by 0.2% mom, rose 0.9% yoy versus expectation of 0.4% mom, 1.0% yoy. Manufacturing production gained 0.1% mom, 1.1% yoy versus expectation of 0.3% mom, 1.5% yoy. Construction output increased 0.5% mom in July versus expectation of -0.4% mom fall.

The euro rose against the dollar amid weakening of the US currency. The single currency did not react to weak data on investor confidence in the Eurozone. Eurozone Sentix Investor Confidence overall index dropped to 12 in September, down from 14.7, below expectation of 13.8. Current situation index dropped to 35.0, down from 37.3. Expectations index also dropped to -8.8, down from -5.8.

Swiss franc fell broadly today as easing concerns over Italy’s budget narrows Italian-German yield spread notably. Canadian dollar is trading as the second weakest. European shares rose slightly today, while stocks in Asian were mostly down. FTSE gained 0.35%, DAX rose by 0.61% and CAC increased by 0.67%. China SSE lost 1.21% to 2669.48, Hong Kong HSI fell by 1.33% to 26613.42, Singapore Strait Times dropped by 0.43% to 3120.92.

10 year Italian yield is down -0.0972 at 2.947, back below 3.000 handle. German 10 year bund yield is up 0.014 at 0.405, back above 0.400. Spread at 300 now looks rather distant.

Steve Baker, a former junior Minister at the Department for Exiting the European Union, warned that there will be 80 or more MPs voting against Prime Minister Theresa May’s Chequers Brexit plan at the party conference. He urged Theresa May to go for the route of a free trade agreement with the terms laid down by European Council president Donald Tusk.