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News

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News

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News

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GBP/USD pair edges higher on UK GDP data

Monday, November 13, 2023

Today’s headlines

What’s happening: The British pound edged higher against the US dollar on Friday as investors digested UK’s GDP data release.

What happened: The British economy remained stable in the third quarter, versus estimates of a contraction.

Investors also assessed other major economic reports on Friday, which sent the sterling to around a one-week high versus the greenback.

Why it matters: The UK economy stalled in the third quarter, versus 0.2% growth in the prior quarter. However, the figure came in better than market expectations of a 0.1% contraction.

In annual terms, UK’s GDP grew by 0.6% year-over-year during the quarter, the same as in the prior quarter, and slightly higher than market estimates of 0.5% growth.

Other data released on Friday showed industrial production in the UK coming in flat in September, versus a 0.5% decline in August. This was, however, lower than estimates of a 0.1% rise. The country’s trade deficit narrowed to £1.57 billion in September, versus £2.70 billion in the previous month, as imports declined by 3.7% month-over-month to a 19-month low.

British finance minister Jeremy Hunt focussed on continuing with his economic plan in a bid to combat higher inflation.

The Bank of England held interest rates at a 15-year high at its latest meeting. Markets widely expect rate cuts of around 40 basis points by September 2024.

Some weakness in the US dollar also lent support to the GBP/USD forex pair on Friday. The US dollar index, which measures the greenback’s performance versus a basket of major currencies, lost around 0.1% to reach 105.80 in Friday’s session.

The GBP/USD rose slightly to 1.2226 on Friday. For the week, the forex pair was down around 1.3%. However, the British currency fell versus the euro, with the European common currency adding more than 0.1% to reach 87.39 pence on Friday.

What to watch: Investors will continue monitoring comments from Bank of England’s officials regarding their monetary policy ahead. Markets will also focus on UK’s employment data, scheduled for release on Tuesday.

The markets today

US stocks will be in focus today ahead of a couple of major economic reports

Context: Stocks on the Wall Street closed sharply higher on Friday, as Treasury yields stabilised.

Details: US stocks recovered on Friday after higher bond yields resulted in a selloff on Thursday, which snapped the longest winning streak for the S&P 500 in around two years.

The benchmark 10-year Treasury yield remained close to the flatline on Friday, after climbing more than 10 basis points in the prior session.

The University of Michigan’s consumer sentiment index fell to a reading of 60.4 in November, from 63.8 a month ago. The figure also came lower than the consensus estimates of 63.7.

All sectors closed higher on Friday, with information technology stocks leading the rally. Shares of Microsoft added more than 2% to reach a record high on Friday, ahead of the company’s conference this week during which it plans to announce its latest AI advancements. Other major gainers included Apple, Walmart, Amgen, IBM and Goldman Sachs.

The Dow Jones index gained 391.16 points, or 1.15%, to close at 34,283.10 on Friday. The S&P 500 rose by 1.56% to 4,415.24, while the Nasdaq 100 jumped 2.25% to 15,529.12.

On a weekly basis, the Dow Jones index gained 0.7%, while the S&P 500 added 1.3%, with all three major indices recording gains for the second straight week.

What to watch: Investors await the release of economic data on consumer inflation expectations and government budget today. US consumer inflation expectations for the year ahead, which rose to 3.7% in September, is expected to ease to 3.6% in October. The US government, which recorded a budget deficit of $171 billion in September, is projected to report a gap of just $40 billion in October.

Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.28%, 0.77%, 0.96% and 1%, respectively.

The news shaping the markets

Russian sources said Ukrainian forces were continuing larger ground operations on the east bank of Kherson. The news sent the US dollar index slightly lower this morning.


The Philippines said its net foreign direct investment had declined 0.3% year-over-year to $0.79 billion in August, which exerted pressure on the PHP/USD forex pair.


Ireland’s BNP Paribas real estate construction PMI fell to 47.3 in October, from 48.6 a month ago. This being the fourth consecutive month of contraction in the sector sent the EUR/USD pair lower in forex trading this morning.


Japan’s producer prices rose by 0.8% year-over-year in October, versus a 2.2% gain in the previous month, exerting pressure on the JPY/USD forex pair.


New Zealand’s BusinessNZ performance of services index declined to 48.9 in October, versus a reading of 50.6 in the prior month, which sent the NZD/USD pair lower in forex trading this morning.

What else to watch today

Japan’s machine tool orders, Turkey’s current account and retail sales, India’s retail price inflation and total passenger vehicle sales, Germany’s current account, China’s new yuan loans, money supply M2, value of loans and total social financing, Spain’s consumer confidence indicator, as well as Brazil’s industrial entrepreneur confidence index and Central Bank of Brazil focus market readout.


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