The week ahead:
- UK services sector PMI data (Wednesday, 9:30am)
- Euro zone Gross Domestic Product data (Thursday, 10:00am)
- US non-farm payrolls employment data (Friday, 1:30pm)
Highlights from last week:
- UK opinion polls spark sterling volatility ahead of general election
- US third-quarter Gross Domestic Product growth stronger than first thought
- New Zealand retail sales stronger than expected
The week ahead – Opinion polls remain in focus as UK election approaches
The UK political backdrop will continue to be key to sterling’s fortunes with the latest polls assessed for clues as to the outcome of the general election on 12 December. On the data front, the monthly purchasing managers’ survey data will provide a gauge of recent UK economic activity. Construction sector activity data is scheduled for Tuesday (9:30am), with figures for the dominant service sector following on Wednesday (9:30am).
Euro zone purchasing managers’ survey data (Wednesday, 9:00am) and retail sales data (Thursday, 10:00am) will offer insights into strength of economic activity across the region. Euro zone Gross Domestic Product data (Thursday, 10:00am) will provide a gauge of the region’s third-quarter economic growth performance.
Purchasing managers’ survey data will also be released for the US services sector (Wednesday, 3:00pm). As ever, the latest monthly non-farm payrolls employment report (Friday, 1:30pm) will be watched closely for evidence as to whether the US jobs market remained resilient in November.
Last week recap – Pound recovers as poll points to strong Conservative lead
Absent notable domestic data releases last week, political considerations ahead of the UK general election on 12 December again provided the main catalyst for sterling’s moves. The pound advanced to its highest level for almost seven months against the euro after a YouGov poll suggested the Conservatives could be on course for a comfortable majority. Prime Minister Boris Johnson has said a win for the Conservative Party’s “get Brexit done” campaign would see the UK leave the EU with a deal by 31 January, so a Conservative majority could potentially offer some clarity for Brexit proceedings. Sterling had temporarily lost a bit of ground earlier in the week after previous polls in fact pointed to a diminishing Conservative lead over Labour. Reports of a rush in voter registrations amongst the under-35 demographic (thought to be more likely to vote Labour) had also initially dented sterling’s progress.
Euro zone inflation edges higher, but still below ECB objective
The euro zone inflation rate rose to 1% in November, up from 0.7% in October and slightly ahead of the 0.9% rate expected. The rebound was largely driven by a 1.9% rise in services prices. The uptick will be encouraging news for the European Central Bank (ECB), as persistently subdued inflation would have been a key factor prompting the central bank to embark on a fresh programme of monetary stimulus measures in September. Even so, the inflation rate remains far beneath the European Central Bank’s (ECB) ‘below but close to 2%’ target level. The unemployment rate across the euro zone fell to 7.5% in October, from 7.6% previously.
At midday on Friday, a telephone conversion of £20,000 to euros via our Currency Service would have purchased €23,256.
US third-quarter GDP growth stronger than initially estimated
US Gross Domestic Product (GDP) growth for the third quarter registered 2.1% at an annualised rate according to the second official estimate. This was slightly higher than 1.9% first estimate, suggesting the US economy remained more resilient than thought during the period. The data had only a muted impact on the US dollar. Meanwhile, US President Trump suggested that a US-China trade deal was close but also that he was delaying any firm agreement to try to secure improved terms for the US. Again, the impact on the US dollar was fairly limited without the specific details of what any eventual deal might entail.
At midday on Friday, a telephone conversion of £20,000 to US dollars via our Currency Service would have purchased US$25,586.
Strong New Zealand retail sales figures support the New Zealand dollar
The New Zealand dollar found some support from strong New Zealand data last week, with the country’s retail sales rising by 1.6% in the third quarter. This was far superior to the 0.5% increase anticipated. Such strength in consumer spending may mean that New Zealand’s economic growth during the period could also turn out to be higher than expected. This would potentially reduce the need for the Reserve Bank of New Zealand to cut interest rates for fourth time in 2019 at this month’s policy meeting.
At midday on Friday, a telephone conversion of £20,000 to New Zealand dollars through our Currency Service would have purchased NZD$39,778.