Euro drifts lower on news of Angela Merkel exit
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The Euro remained pinned below the 1.14 mark against the US Dollar on Tuesday morning, weighed down by the news that Angela Merkel would not seek a fresh term as German chancellor following recent poor election showings.
Next up for the Euro-area will be this morning’s third quarter GDP figures, which are expected to show that the economy of the currency bloc grew by 0.4% quarter-on-quarter in the three months to September. Arguably of greater significance will be Wednesday’s preliminary inflation data for October, given its importance for ECB decision making.
Hammond plans to ‘end austerity’ during autumn budget
UK Chancellor Philip Hammond’s autumn budget announcement provided little assistance to the Pound, which ended the session back below the 1.28 level against the greenback.
As is generally the case, the budget was not a particularly big FX market mover, with currency traders largely overlooking Hammond’s announcement of upwardly revised GDP projections. According to Hammond, the OBR is now forecasting the UK economy to expand by 1.6% in 2019 and 1.4% in 2020, up from the 1.3% forecast for both years back in March. There was also a sharp downward revision to budget deficit projections to 1.2% in 2018/19 from 1.8% and 1.4% in 2019/20 from 1.6%. Even the promise to ‘end austerity’ with billions in extra spending was insufficient to support the Pound yesterday, still firmly on the back foot amid the lack of any positive Brexit news.
This week bodes to be a busy one in the UK, with the Bank of England to announce its latest policy decision on Thursday, including the release of its quarterly Inflation Report.
Strong US nonfarm payrolls report eyed this week
Attention in the US this week will be firmly on Friday’s nonfarm payrolls report for October. Another impressive month of job creation around the 190k mark is eyed, with wage growth expected to print above 3% year-on-year for the first time since 2009.
In the lead up to the release of Friday’s report, US personal income data surprised to the downside yesterday, coming in at 0.2% in September versus the 0.3% consensus. The core CPE index, the Fed’s preferred measure of inflation, also came in unchanged at 2% year-on-year.