Pound firms as UK GDP rebounds in August

The pound appreciated again on Wednesday, supported by a rebound in UK GDP, but being tempered by concerns over congestion at UK ports.

Sterling appears to be consolidating these gains so far this morning, with GBP/EUR flat at €1.1795 and GBP/USD buoyed at $1.3693. GBP/CAD is muted at C$1.6976, while GBP/AUD and GBP/NZD hold steady at AU$1.8496 and NZ$1.9568 respectively.

Looking ahead, will a drop in US initial jobless claims help to bolster the US dollar later this afternoon?

What’s been happening?

The pound trended broadly higher yesterday, with the currency initially finding support following the publication of the UK’s latest GDP figures, after they showed economic growth rebounded in August, albeit at a slightly slower pace than expected.

Sterling’s gains were capped however by reports warning that congestion at the UK’s ports could limit the availability of certain consumer goods over the Christmas period.

The US dollar, meanwhile, ticked lower during Wednesday’s European trading session, as a stronger-than-expected US inflation reading was offer by a modest improvement in market risk appetite.

The ‘greenback’ continued to soften through the evening, in spite of the latest FOMC Minutes indicating the Federal Reserve is likely to start tapering its asset purchases from November.

At the same time, the euro was mostly muted yesterday, after the Eurozone’s industrial production figures reported a sharp plunge in factory output across the bloc in August.

What’s coming up?

Turning to today’s session, the most high profile data release looks to be the latest US jobless claims release.

Last week’s figures are expected to report that initial jobless claims continued to decline, with the release potentially buoying the US dollar as a continued improvement in the US jobs market will further reinforce expectations for a tapering announcement from the Fed next month.

In the meantime, GBP investors will keeping an eye out for a speech from Bank of England (BoE) policymaker, Silvana Tenreyro, who could propel the pound higher if she signals the bank may hike interest rates by the end of the year.

On the other side of the Channel, a series of speeches by European Central Bank (ECB) policymakers could limit the upside potential of the euro as they are likely to reiterate the bank’s reluctance to start tightening its monetary policy.