European Majors Stabilize, USD Gets No Boost From PPI

Market Reviews

The British pound remains steady versus US dollar, despite soft economic data. UK GDP was flat in August, grew 0.0% mom, below expectation of 0.1% mom. Though, July’s figure was revised up from 0.3% mom to 0.4% mom. For the three months from June to August, GDP grew 0.7%. UK industrial production rose 0.2% mom, 1.3% in August, above expectation of 0.1% mom, 1.1% yoy. Manufacturing production fell 0.2% mom, rose 1.3% yoy, below expectation of 0.2% mom, 1.5% yoy. Visible trade deficit widened to GBP -11.2B in August, above expectation of GBP -10.9B.

Euro is trading as the strongest one for today with British pound, as German-Italian spread is back below 300 today. Italian 10 year yield is down -0.017 at 3.494. German 10 year yield is up 0.0265 at 0.578.

The USD is trading slightly firmer today and mixed PPI data from provides no help to the greenback. New Zealand dollar and Australian dollar are the weaker ones. US PPI rose by 0.2% in September in a line with forecasts, after 0.1% fall in August. On annual basis, producer prices gained 2.6%. Economists had expected 2.8% growth. The core PPI increased by 0.1% mom and 2.9% yoy in August.

Global shares were mixed today. CAC lost 0.99%, DAX fell by 0.88%, FTSE was down 0.27%. Earlier in Asia, Nikkei rose 0.16%, Hong Kong HSI gained 0.08%, China Shanghai SSE increased 0.18%. Singapore Strait Times dropped by 1.11%.

German government has cut its economic projections for 2018 and 2019. According to the forecasts, German GDP is expected to grow by 1.8% in both 2018 and 2019, down from prior projections of 2.3% and 2.1% respectively. For 2020, growth is expected to be unchanged at 1.8%. Inflation is projected to be at 1.9% in 2018 and rise further to 2.0% in 2019.

According to IMF’s latest forecasts, German growth is projected at 1.9% in 2018 and 1.9% in 2019, revised down from April forecasts of 2.5% and 2.0% respectively.

John Williams (New York Fed President) said that recent FOMC statement well summarized the current US economy, with the word “strong” appeared five times.” He added that “most indicators point to a very strong labor market” while “inflation is right on target:” He expected fiscal stimulus and favorable financial conditions to provide “tailwinds” to the economy for stronger growth. He expected real GDP to grow by 3.0% in 2018 and 2.5% in 2019. Unemployment rate is expected to edge down to slightly below 3.% next year. Price inflation is expected to move up a bit above 2%.