US Dollar Stays Strong After Q3 GDP Data, Global Stocks Broadly Lower

Market Reviews

Japanese yen and US dollar are trading as the strongest ones today on increased risk aversion. Meanwhile, stronger than expected US Q3 GDP data gave some support to the dollar. Commodity currencies are the weakest ones, led by New Zealand dollar and Australian Dollar. Euro and British pound are also weak.

On stock markets, FTSE lost 1.10%, DAX fell by 1.17%, CAC was down 1.64%. Earlier in Asia, Nikkei closed down 0.40%, Singapore Strait Times dropped by 1.35%, Hong Kong HSI fell by 1.11%, China Shanghai SSE lost 0.19.

US economy grew more than expected in the third quarter. The Bureau of Economic Analysis reported, that GDP rose by annual rate of 3.5% in the three-month period from July to September, slowing from growth of 4.2% in Q2, which was the strongest reading in four years. The Q3 data exceeded expectations for a 3.3% gain.

The UK National Institute of Economic and Social Research (NIESR) released its new economic forecasts. Under a soft Brexit scenario, GDP to grow 1.4% in 2018, 1.9% in 2019 and then slow to 1.6% in 2020. CPI is expected to slow from 2.3% in 2018 to 1.9% in 2019 and then climb back to 2.1% in 2020. Unemployment is projected to drop from 4.1% to 4.0% in 2019 then rise back to 4.5% in 2020. BoE interest rate will rise from 0.8% to 1.3% in 2019 and then 1.8% in 2020.

However, under a no-deal Brexit, GDP growth will slow sharply from 1.4% to 0.3% in 2019, and 0.3% in 2020. Inflation will surge to 3.2% in 2019 before falling back to 2.6% in 2020. Unemployment rate will jump to 5.3% in 2019 and rise further to 5.8% in 2020. BoE will have to raise interest rate much faster to 2.6% in 2019 before dropping to 2.5% in 2020.

According to the ECB Survey of Professional Forecasters (SPF), headline inflation is projected to be at 1.7% in 2018, 1.7% in 2019 and 1.7% in 2020, unrevised. Core inflation is projected to be at 1.1% in 2018, 1.4% in 2019 and 1.7% in 2020, revised slightly down. GDP growth is projected to be at 2.0% in 2018, 1.8% in 2019 and 1.6% in 2020. There were downward revision of -0.2% for 2018 and -0.1% for 2019.