| Pound Sterling: GDP revision today |
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| Written by Mark Deans at MoneyCorp | |
| Tuesday, 22 December 2009 09:37 | |
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This morning's Mark Deans column: GDP expected to be revised upwards, but will it be enough to satisfy those trading Pound Sterling? _____________________Good morning. Market Harborough council's business prevention department delivered a masterstroke when it cancelled, at three hours' notice, a festive display of reindeer arranged to encourage shoppers into the town centre. The ban was imposed because 'There is a risk of slips and falls to attendees at the event when the conditions get worse.' And that was just potential snow. Real snow further to the southeast has crippled the Eurostar train service. Domestic TGV services in France are experiencing no problems but the Eurostar locomotives are specially engineered to comply with the failure characteristics of English trains. Pound Sterling's performance yesterday cannot exactly be described as failure. It slipped another cent against the buoyant US dollar and at one point was half a cent adrift against the euro but it gained on the day against the yen, the New Zealand dollar and the Aussie (just). There were no UK ecostats on Monday to get in the way. Pound Sterling's problems stemmed from what might crop up today and tomorrow. The day's surprise performer was the Canadian dollar. During London's morning session it set off upwards on a mission that took it almost 1.5% higher. It was helped on its way by a third month of robust Canadian retail sales but the move was driven by a more general feeling that the Canadian economy is doing well. Seasonal illiquidity probably exaggerated the move, as evidenced by the Loonie's sharp retracement in the afternoon. As touched upon above, the market is nervous about tomorrow's Monetary Policy Committee minutes and today's final revision to Britain's third quarter GDP. A month ago there was disappointment when the upward revision (to -0.3%) was not as positive as investors had expected. It looks as though they spent yesterday preparing themselves mentally for another letdown. Analysts predict that construction output will bring Q3 GDP up to -0.1% but you can be sure that plenty of people out there will be hoping for a positive number, just as they were last month. And even -0.1% is still negative, representing an 18th month of value destruction. It is probably fair to assume that anything above zero will be good for the pound. The question is how a minus number might affect it and to what extent the gloom is already built into the price. There are two more GDP figures due out before midnight. The United States is expected to confirm annualised growth of around +2.8% in Q3. Translated into equivalence with the rest of the world that equates to quarterly growth of +0.7. Tonight's figure from New Zealand is supposed to be +0.4%. But neither of those is charged with great meaning for the pound.
It will be the UK figure that decides sterling's fate. We can reasonably expect an upward revision to Q3 GDP but will it be enough to satisfy the market? If not, we could be in for a rerun of last month's revision when over-optimism led to a one-cent fall. 
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| Last Updated ( Tuesday, 22 December 2009 09:40 ) |