FX Market Update 22nd October 2010
All eyes are focused on GDP for the US and the UK this week. We have (Q3) Preliminary GDP from the UK tomorrow morning with the figure forecasted at just 0.4%. If this is the case, this represents a significant slowing in the economic recovery and will weigh on the pound with concern over additional QE stimulus as soon as November in the next MPC meeting. Some economists have suggested that the figure could even end up in negative territory signalling that the UK economy is slipping back into a recessionary period.
Concern over last weeks austerity measures and the resultant impact continues to dominate headlines. The UK economy is suffering from budget deficit and double dip recession concerns. If tomorrow’s figures are released at a below par level we would expect markets to respond moving rapidly southwards. Other concerns for the UK economy for (Q2) are October’s Nationwide house price index, Gfk consumer confidence and mortgage applications for September.
Markets look towards the advance estimate of US GDP for Q3 on Friday. This will help indicate ‘post tomorrows UK prelim GDP release’, whether the US will undertake additional QE before the UK. The markets seem tentative with traders driving the USD lower not on speculation as to whether additional stimulus will be issued by the Fed but now on how much. Traders seem increasingly concerned that we may have seen the weak point for the USD and could now see further pull back on cable and a retracement on EUR/USD.
Torfx Currency Dealer
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