UK GDP figures this morning showed the British economy grew by 0.5% in the second quarter, mainly due to stronger services activity as well exports influencing a drive in growth. Services output in particular rose by 0.6% through professional, scientific and technical research, which combined all grew by over 2%. Construction output also climbed by 0.8%, falling just shy of expectations of 1% growth.
Production fell marginally, as declines in electricity, gas, steam and air-conditioning supply offset gains seen in manufacturing and mining.
Throughout the day we have two inflation releases in Europe, in Italy & Germany. Both data sets, albeit preliminary show that inflation is still increasingly stubborn across Europe with Italy’s figures expected to climb to 3.8% on the year and Germany’s forecast to climb to 3.1. The concern for The European Central Bank will be the direction moving forward, having recently just increased interest rates. Any growing speculation around future rate hikes off the back of this data could bring some strength to the Euro against a basket of currencies.
In the afternoon session, dominated by US data, we have ADP Employment Change which measures the health of the private employment sector. Figures are forecast to show an increase of 32,000 jobs against last month which would no doubt provide some US Dollar strength this afternoon. Not only does it show a strong jobs sector, but it also ties in nicely with the Non-Farm Payroll this coming Friday.
We also have the Federal Reserves preferred inflation measure in Personal Consumption Expenditure which is set to double in output on the monthly comparison, and crucially staying resilient at 3.7%. Alongside this release we have Personal Income and Spending. The highlight will be personal spending with figures showing an increase from 0.2% to 0.8%. Both data releases will be encouraging for The Federal Reserve, but one to keep an eye on for October’s release as they will want to monitor how the most recent interest rate hike has impacted consumers. If we were to see similarly positive figures next month, it would allow the Federal Reserve to continue on its path of interest rate hikes, ultimately bringing further US Dollar gains.
GBP/EUR 1.1673 GBP/USD 1.3257 GBP/AED 4.8733
GBP/AUD 1.9010 GBP/CHF 1.1043 GBP/CAD 1.8802
GBP/NZD 2.3446 EUR/USD 1.1341 GBP/ZAR 21.7099