UK GDP unrevised The Gross Domestic Product (GDP) data released during last week showed that the UK economy grew by 0.5% during the third quarter of 2015. The picture for domestic spending was positive with the household spending up 0.8% quarter-on-quarter. Investment growth also grown, increasing 1.3% and real government spending again defied austerity to rise by 1.3% quarter-on-quarter. Sentiment among British consumers decreased a little in November 2015. The GfK monthly survey reported that the headline index of consumer confidence fell to +1 in November from +2 in October 2015. Although confidence has slipped slightly since the summer, when the index reached fifteen-year highs of +7, the current readings are still high by historic standards. There was a modest increase in mortgage approvals for house purchase by the British Bankers Association (BBA) members during October 2015 that suggests that activity in the housing market has resumed its upward trend, after an unexpected reverse in September 2015. While October’s increase wasn’t particularly large (a gain of 612 from September 2015), last month’s total of 45,400 means that approvals have risen by more than a fifth over the past year.
GBP/USD traded within a 1.06% range last week, with the currency pair hitting a high of $1.5194 on Monday and a low of $1.5034 on Friday.
US economy continues to grow The US Gross Domestic Product (GDP) growth during the third quarter of 2015 was revised slightly higher, the headline ‘annualised’ growth rate of 2.1% (revised up from an initial estimate of 1.5%) indicated that GDP grew by 0.5% from the previous quarter. Though not a particularly large revision, it adds to the likelihood that the US Federal Reserve (Fed) will press ahead with starting to raise interest rates at its next policy meeting, as discussed during previous meetings of the Federal Open Market Committee (FOMC). The most important data that will appear between now and the policy meeting on 15-16 December 2015 is the ‘Nonfarm payrolls’ data for November 2015. These will be released this Friday, 4 December, and barring any unexpected setback in labour market conditions the Fed may announce if a quarter-point rate rise on 16 December is likely to happen.
Eurozone recovery continues The Eurozone composite Purchasing Managers Index (PMI) improved further during November 2015, climbing to a 54-month high. The service sector continues to lead the way, with strong job creation and rising backlogs of work. The manufacturing sector also posted some healthy gains, thanks to rising domestic and export orders. The composite PMI hit a high of 54.4 in November 2015 from 53.9 in October 2015. This was led by the services sector rising from 54.1 in October 2015 to 54.6 in November 2015, making it also a 54-month high. The manufacturing PMIs edged to a 19-month high of 52.8 in November from the 52.3 registered in October 2015. In the services sector, the pace of job creation was the highest since November 2010 and the backlogs of work the highest since May 2010.
Last weeks data release continues to point to the resilience of the service sector of the Eurozone, with strong job creation and rising backlogs of work. The manufacturing sector also appears to be shrugging off the weakness in global growth, possibly also thanks to the recent renewed weakness of the euro. This continues to point to positive, albeit moderate, growth across the Eurozone, in the fourth quarter of 2015.
EUR/GBP hit a high of £0.7079 on Wednesday and a low of £0.6996 also on the same day before closing off the week on Friday trading at £0.7050. EUR/USD hit a high of $1.0679 on Wednesday but after this the EUR lost some ground against USD, hitting $1.0578 on Friday and making it the lowest for the week.
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