Pound supported by surprise UK growth upgrade
Philip McHugh December 23rd 2019 - 2 minute read
– Pound bounces back thanks to gross domestic product revision
– Surprise retail sales decline weighs on Canadian dollar
– US dollar extends positive run on solid growth
Growth data helps Sterling recoup losses
The pound bounced back from its monthly lows ahead of the weekend thanks to a surprise upward revision of the third quarter UK gross domestic product.
With a quarterly growth rate of 0.4% anxieties over the outlook of the UK economy temporarily eased, in spite of signs of weakness in recent fourth quarter data.
Speculation over the odds of a January Bank of England (BoE) interest rate cut could see GBP exchange rates giving up some of their positive momentum, however.
As long as the fear of a cliff-edge Brexit continues to cast a shadow over the domestic economy the risk of an imminent rate cut may limit the upside potential of the pound.
Canadian dollar looks to recover ground on monthly GDP data
Demand for the Canadian dollar weakened sharply in the wake of a shock -1.2% collapse in October’s retail sales data.
This unexpected decline in retail sales suggests a weaker level of consumer confidence, pointing towards a softer economic performance in the fourth quarter.
However, CAD exchange rates could find a rallying point this afternoon if October’s monthly gross domestic product reading impresses.
Evidence that the economy continued to gain modest momentum at the start of the fourth quarter may help to lift the Canadian dollar in the short term.
Signs of stronger economic activity likely to boost US dollar
Confirmation that the annualised US growth rate accelerated to 2.1% on the quarter encouraged USD exchange rates to hold onto a positive footing.
While the University of Michigan consumer expectations index failed to strengthen as much as forecast this was not enough to dent the US dollar on Friday.
The mood towards the US dollar could remain positive today if the Chicago Fed national activity index improves as anticipated.
Although the index is expected to remain in negative territory any uptick in activity could still encourage USD exchange rates to gain ground.
Monday, 23rd December 2019
13:30 CAD Gross Domestic Product
13:30 USD Chicago Fed National Activity Index