Revised GDP figures yesterday confirmed that the UK did contract by 0.3% in the fourth quarter of 2012 but also confirmed that the UK did grow by 0.2% overall last year.
The data came in as expected, however little movement was seen on sterling crosses as trading remained range bound throughout European trading hours.
The euro zone came into focus again as Italy went about selling 5-year and 10-year government bonds yesterday. Given the recent uncertainty in the country the outcome was surprisingly good with the full €6.5bln being sold. The bond sale, as well as better than expected industrial confidence and services sentiment data supported the euro as the single bloc currency made gains across the board. Euro investors should however take note of comments made by ECB President Mario Draghi, who stated that the ECB were “far” from considering an exit from monetary stimulus and inflation forecasts for next year could be well below 2%. This could pressure on the ECB to potentially reduce interest rates.
Renewed risk appetite caused the US dollar to weaken yesterday following solid US data and a second day of comments by Federal Reserve Chairman Ben Bernanke. Bernanke stated that the current monetary policy programme hasn’t caused inflationary pressures, as well as adding that the economy may be turning a corner for the better.
UK Gfk consumer confidence figures released this morning came in better than expected giving the pound support in early trade. However with a lack of data coming from the UK, investors will be taking cues from the euro zone and US before deciding where to invest their money. Spanish GDP figures have shown a further contraction in the country as well unemployment figures printing higher than expected. The focus for the rest of the day will be inflation figures from both Germany and the euro zone as well as GDP figures from the US.
10.00am – EUR – Euro zone Consumer Price Index (Jan): Expected to remain at 1.5%.
13.00pm – EUR – German Consumer Price Index (Feb): Expected to decrease to 1.6%.
13.30pm – USD – Gross Domestic Product (Q4): Expected to remain at 0.5%.
13.30pm – USD – Initial Jobless Claims (Week ending Feb 24): Expected to reduce to 360k.