IFX Market Report: Thursday 12th November 2020

Sterling has started Thursday under considerable pressure as GDP fell short of expectations this morning, coming out at 15.5%, while being forecasted at 15.8%. Despite this figure being the UK’s sharpest quarterly expansion since records began in 1955, GDP is still 9.7% below where it was at the end of 2019.

According to the Office for National Statistics (ONS) monthly growth slowed throughout the third quarter. GDP expanded by 6.3% in July, slowing to 2.2% in August, and 1.1% in September. With England now in a month-long lockdown until (at least) 2nd December amid a resurgence in COVID-19 cases, the V-shape recovery that so many were hoping for is likely to lose steam in the final three months of the year.

This, combined with the fact that markets are becoming less optimistic about an EU-UK trade deal being secured by the 31st December deadline, has stunted Sterling’s vigour and will continue to cap any upside for the Pound. GBPUSD opened yesterday strong at 1.3277 and after a very brief spell in the 1.33 range, found strong resistance at this level and depreciated rapidly. The loss of momentum carried on throughout the session and the pair finally closed the day off just above the 1.32 mark at 1.3203. It is worth noting after this morning’s disappointing GDP figure cable has fallen even further – now trading just above 1.3180 (08:16 GMT).

GBPEUR also lost some ground in Wednesdays session. The pair opened at 1.1260, and as Brexit sentiment soured with the lack of consensus between the UK and EU persisting, finally closed the day at 1.1221.

The U.S. Dollar held its gains yesterday as markets maintained their bullish expectations surrounding a COVID-19 vaccine. EURUSD opened the day yesterday just shy the 1.18 handle at 1.1791 and closed the session below that mark at 1.1766.

On the data front, a busy day for both economic releases and speeches from central bankers. As already mentioned, UK GDP fell short of expectations this morning but it wasn’t the only UK economic release to disappoint; Industrial Production also came up short at -6.3%, and Manufacturing Production was below forecasts, coming in at -7.9%. At 07:00 we also had the German Inflation Rate, coming out as predicted at -0.2%. In the afternoon we have the weekly U.S. Jobs Report and Inflation Rate, followed by a number of speeches from Fed members.

Older posts
Newer posts