British Pound Recovers From 2-Week Lows

Market Reviews

Sterling rose from two-week lows today and is trading as the strongest one. UK government has released its long term Brexit economic analysis. The UK government predicts that, according to a scenario similar to Theresa May’s plan, the UK economy will grow 2.1% less in 15 years than if the country remained in the EU. Without a deal, it will decrease by 7.7% in 15 years.

The US dollar has been rising for the fourth day in a row, as rising trading tensions prompted investors to seek safe haven in the US currency, although the speech of the Federal Reserve Chairman may limit these gains. Today’s data showed, that US Q3 GDP growth was unrevised at 3.5% annualized, below expectation of 3.6%. US trade deficit widened to USD -77.2B in October, above expectation of USD -76.7B. Wholesale inventories rose 0.7% mom versus expectation of 0.5%.

The euro remains weak, together with Japanese yen and Canadian dollar. Economic data from the Eurozone showed, that German Gfk consumer climate for December dropped -0.2 to 10.4, slightly below expectation of 10.6. UK BRC shop price rose 0.1% yoy in November. Eurozone M3 rose 3.9% yoy in October, above expectation of 3.5% yoy.

On stock markets, FTSE fell by 0.10%, mainly due to pound’s strength. DAX added 0.15% and CAC gained 0.26%. Earlier in Asia, Nikkei added 1.02%, Hong Kong HSI gained 1.33%, China Shanghai SSE rose 1.05% and Singapore Strait Times increased 0.13%.

Luis de Guindos (ECB Vice President) stated today, that the growth of the Eurozone economy is still large-scale, but low productivity and high indebtedness maintain a weak overall growth rate compared with other advanced economies.