Currency Note

Sterling weakens in run-up to Christmas break

By Alex Bennett December 23rd, 2022

Sterling’s difficult pre-Christmas run continued yesterday, as the pound fell close to its lowest level against the euro since October, and against the US dollar since late November.

The losses followed a downward adjustment in the last quarter’s GDP figure from the Office for National Statistics (ONS), to a drop of 0.3%, and an overall year-on-year growth figure of just 1.9%.

Today wraps up a quietish week for UK data as the country prepares for the Christmas weekend. The only key release from the UK today came from the Society of Motor Manufacturers and Traders Limited, which released December’s car production data. It showed that Britain’s production rose by 5.7% from last year. While this is less than expected, it nevertheless shows that supply chain and microchip shortages are being solved.

In the latest strike news, UK Border Force staff are striking, potentially closing ports and airports, and being joined by Highways staff and postal workers. The NHS expects a surge in calls over the next coming days too. The interim chief executive of NHS Providers, Saffron Cordery said they are expecting “a surge in demand for emergency treatment”.

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We’ll see lots of interesting data throughout the eurozone over the course of the morning. We’ve just seen France’s Producer Prices Index rising fast, at 1.2% last month, Spanish GDP also exceeding expectations at 4.4% year on year. At 9am both Italy’s business confidence and consumer confidence will be released.

US market watchers will be keeping a close eye on today’s personal income and spending data, being released this afternoon.

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GBP: Pound weakened by revised GDP

Yesterday’s final GDP data triggered the pound to weaken against both the euro and the dollar. The data revealed that the British economy contracted 0.3%, slightly more than the preliminary estimate of a 0.2% drop. One reason for the contraction is the additional Bank Holiday in September for the State Funeral of Queen Elizabeth II, where some businesses closed or operated differently on this day.

There are no further data releases in the UK until after the Christmas Bank Holidays.

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EUR: A quiet start to 2023 for German economy?

EUR/USD strengthened during the Asian trading hours on Thursday. This was supported by the selling pressure surrounding the US Dollar.

Meanwhile, in its latest monthly report, Germany’s finance ministry said that it expects Germany’s economic activity to remain subdued Q4 of this year and Q1 of 2023.

USD: Jobless claims on the rise

Yesterday, in contrast to the UK figure, America’s quarterly GDP was revised upwards, to growth of 3.2%.

Consumer spending was also above expectations, while corporate profits rose by 0.8%, four times better than forecast.

The number of Americans filing new claims for unemployment benefits rose to 2,000, to 216,000, in line with forecasts. Investors will be watching closely to see how these new and emerging unemployment claims will impact financial markets and possibly, the dollar’s movements.

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