Euro off its lows
The euro slipped to an intra-day low of about $1.0770 against the dollar yesterday before recovering some ground after the release of a mixed bag of US economic data, and is trading at around $1.0840 this morning ahead of Euro area and US third-quarter GDP releases due later. The pound is also firmer against the US currency, back above the $1.30 level, with the new Labour government’s first budget the focus in the UK today, while EURGBP is trading at about £0.8325 having dipped to £0.8300 yesterday.
US government bond yields ended flat to slightly lower yesterday on the back of the economic data, but German and UK yields edged higher (by around 5-6bps in the case of 10-year yields, though some of this is being reversed in early trading this morning). In equity markets, European stocks ended lower, giving up some of the gains they made over the previous few sessions, while US indices were mixed, with the Nasdaq adding 0.8% but the S&P 500 ending flat (and the Dow Jones lower) on the day.
Yesterday’s economic data in the US included job vacancies for September, which posted a larger than expected decline in the month. The number of vacancies continues to trend down, pointing to a gradual cooling in labour demand in the economy (which is one of the reasons the Fed has begun to lower interest rates). Meanwhile, consumer confidence rose by more than expected in October according to the Conference Board’s measure, reversing September’s decline to reach its best level since January this year, though in any case consumer spending has been growing at a very steady and solid pace recently (as should be evident again today’s Q3 GDP data) notwithstanding the ups and downs in consumer sentiment.
Ahead of Euro area GDP for Q3 later today, the French economy grew faster than expected in the third quarter according to data released earlier this morning – GDP rose by 0.4% q-o-q after increasing by 0.2% in Q2 – albeit partially boosted by the Olympics it seems. The Spanish economy also expanded more strongly than expected in Q3, with GDP up 0.8% q-o-q for a third quarter in a row, while the Irish economy grew by 2% q-o-q in the third quarter (as per yesterday’s flash reading) having contracted by 1% in Q2.
Today’s GDP data for the Euro are expected to show the economy expanded by 0.2% q-o-q in Q3 according to the consensus forecast, the same as the Q2 outturn (with the German economy again likely to have acted as a drag on growth), while equivalent data for the US are expected to show its economy expanded by 0.7%, much the same as in Q2. Other data due include the Euro area Economic Sentiment Indicator and ADP employment in the US, both for October. In the UK, the new Labour Chancellor, Rachel Reeves, presents her first budget to Parliament, which is expected to contain a mix of tax increases and measures to boost investment.