29 July, AtoZForex.com, Lagos – UK Prelim GDP q/q released yesterday showed the country’s economy grew impressively in the second quarter as business services and finance strengthened. The 0.7 percent increase in gross domestic product marked a 10th straight expansion and followed a 0.4 percent advance in the previous three months, coming inline with economists’ forecast. Also putting the country ahead all other G7 nations in terms of GDP growth for the year so far. According to the office of national statistics, Output increased in 2 of the main industrial groupings within the economy in Quarter 2 (Apr to June) 2015. Services increased by 0.7% and production increased by 1.0%. Construction growth was flat.
Source: Bloomberg, AtoZForex.com
In contrast agriculture decreased by 0.7%. GDP was 2.6% higher in Quarter 2 (Apr to June) 2015 compared with the same quarter a year ago. In Quarter 2 (Apr to June) 2015, GDP was estimated to have been 5.2% higher than the pre-economic downturn peak of Quarter 1 (Jan to Mar) 2008. From the peak in Quarter 1 (Jan to Mar) 2008 to the trough in Quarter 2 (Apr to June) 2009, the economy shrank by 6.0%. The GBP rallied across board, as the strong figures also fortifies rate hike expectations, following Governor Carney’s comments on impending rate increase to commence soon.
US Consumer Confidence falls
The US CB Consumer Confidence fell in July by the most since August 2011 as Americans grew less upbeat about prospects for the economy, employment and their finances. According to the official release from the conference board, Lynn Franco, Director of Economic Indicators at The Conference Board summarized the data in his statement: “Consumer confidence declined sharply in July, following a gain in June. Consumers continue to assess current conditions favorably, but their short-term expectations deteriorated this month. A less optimistic outlook for the labor market, and perhaps the uncertainty and volatility in financial markets prompted by the situation in Greece and China, appears to have shaken consumers’ confidence. Overall, the Index remains at levels associated with an expanding economy and a relatively confident consumer.” The USD remains mixed ahead of today’s FOMC meeting.
RBNZ open to further cuts
In his speech yesterday, Reserve bank of New Zealand Gov Wheeler confirmed that at this stage some further monetary policy easing is likely to be required to maintain New Zealand’s economic growth around its potential, and return CPI inflation to its medium-term target level. Further exchange rate depreciation is necessary, given the weakness in export commodity prices and the projected deterioration in the country’s net external liabilities over the next two years, Governor Graeme Wheeler said. The RBNZ has cut the official cash rate twice in the past two months to revive inflation from near zero as falling dairy prices curb economic growth. Most economists forecast two more reductions by October, returning the key rate to a record low of 2.5 percent, and some see even deeper cuts. The New Zealand dollar strengthened as high as 67.38 U.S. cents from 66.87 cents before the Gov.’s speech. The currency has fallen over 12 percent in the last three months and is likely to go lower as the Central bank vies for lower rates.
The major highlight or the day is the Federal Funds Rate, alongside the FOMC Statement. Rates divergence exists as countries like New Zealand are looking to further cut rates, while the Fed are looking to lift rates. Traders and investors are not expecting a rate hike, but desperately seek further hints on the timing of the lift off from nine year lows, with high expectations for a September lift off. An hawkish statement could boost the dollar following its recent mixed nature. The rebound in U.S. jobs, the inflation situation, the recent renewed drop in oil prices are all factors which the Fed will take into consideration before deciding on the next course of action.