US growth surprises economists; creditors lose patience with the UK

Thursday was another strong day for the dollar, as it picked up 0.6% on the euro and more than 0.75% on the pound. Part of this growth seems to be driven by surprisingly high US GDP growth. While less dramatic, the euro still picked up 0.17% on sterling.

Today marks two months until Chancellor Rachel Reeves delivers the autumn budget on November 26, however the markets are already showing impatience with the uncertainty. Throughout the summer rumours of various tax rises and redesigns were splashed across the media, but without knowing which will come to pass, it makes it more difficult to calculate returns on investment in the UK.

Yesterday saw shrinking demand to buy UK debt, a sign of this growing disinterest in the UK. The return on a nine-year bond increase to 4.58%, up from 4.55% in July, showing the government is struggling to sell its debts.

And, of course, if the cost of debt increases, it puts even more pressure on the government to raise the money to pay it off.

Over in the US, a revised assessment of economic growth in the past year shows a surprising increase to 3.8%, significantly higher than the 3.3% forecasts.

However, this growth paints a confusing picture. The cost of tariffs has driven down imports and recent labour figures have shown a major downturn in the US jobs market, but with GDP rising, is the US in a strong position, or is this growth a reflection of the previous administration’s last acts? GDP, after all, lags a few months behind current events.

Although last week saw the Federal Reserve cut interest rates for the first time in nine months, this GDP growth suggests it may not need to make any more cuts in the coming months. Unless future cuts are to anticipate a coming downturn…

It was a relatively quiet day in Europe, although a survey of German consumers showed they had increasing confidence in the economy. This counters the previous days report that German businesses were losing confidence in the markets.

Next week’s inflation data from the eurozone bloc will paint a clearer picture.

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GBP: Debt costs rising as creditors lose interest

It was a bad day for sterling, with the pound losing 0.15% against the euro and 0.75% against the dollar. The government struggled to sell bonds, showing creditors are losing patience with the state and future of the UK economy.

GBP/USD past year

EUR: Middle road taken ahead of inflation data

The euro took the middle path on Thursday, lagging the dollar by 0.6%, but gaining 0.15% on the pound. The relative calm came from a lack of major data releases. However, next week, inflation reports will reveal the state of the eurozone economy.

EUR/USD past year

USD: Above predicted growth

The dollar is riding high, picking up 0.6% on the euro and more than 0.75% on the pound. The surprise announcement that GDP was growing at a rate of 3.8%, much higher than forecast, drove these gains. However, the good news makes the Fed’s next interest rate cut decision a much more difficult one.

USD/GBP past year

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