US GDP revision surprises to the upside as jobless claims fell whilst European figures disappoint

Tom Tong01/Mar/2013Currency Updates


The pound managed to hold steady against the U.S. dollar and even bag a few gains against the euro due to the lack of top-tier UK economic data released during yesterday’s trading. The only report released from the UK was the GfK consumer confidence figure that came in line with expectations at -26 and was unchanged from the previous month’s reading.

Today, the UK will release the Nationwide HPI figure and the manufacturing PMI. Of these two reports, the manufacturing PMI will probably have a bigger impact on price action. The report is expected to show an improvement from 50.8 to 51.0, reflecting a stronger expansion in the manufacturing sector. However if the actual figure misses the forecast, or if it comes in below the previous month’s reading, then the pound could be in for another round of selling.


Just when we thought that the euro was gaining ground in the markets, it pared most of its gains against the dollar and the pound yesterday. It was stable against the yen, and gained strength against the franc.

The euro zone’s economic reports came in worse-than-expected. Data from Germany yesterday showed that while the number of unemployed workers trickled lower, the unemployment rate remained steady. Consumer spending in France slipped far more than expected in January, slipping 0.8% rather than the 0.1% that the markets had expected.

The on-going fiasco surrounding the Italian elections is also weighing negatively on the currency, with the various parties unwilling to ally and form a solid government. We are likely to see the Euro continue to be affected until Bersani can form a coalition government that would eliminate the need for another election.

At 8:00 am GMT Germany’s retail sales report came in positive at 2,4% vs expected -1,7%. At 10:00 am GMT we’ll see Italy’s monthly and quarterly unemployment numbers.


The dollar performed strongly yesterday, overachieving against a number of the other major currencies. The preliminary GDP report indicated that the U.S. economy grew 0.1% last quarter, which was a nice change from the initial report which showed a -0.1% decline. However, this was well short of the 0.5% forecast.

Meanwhile, jobless claims fell to just 344,000, down from the 366,000 posted last week and also below the anticipated 361,000 figure. While our peers over at the Fed are indeed focusing on employment, their main concern is job creation, not merely to have less people accepting unemployment benefits. That said, this doesn’t alter the central banks’ strategy at all.

The Chicago PMI also came in with a pleasant surprise, as the index clocked in at 56.8, more than two points above the projected 54.6 figure. This means that purchasing managers from the Chicago area are slightly more optimistic about the state of business conditions right now.

However, it seems that the major theme for yesterday was risk sentiment. Lawmakers in Washington failed to come up with a deal to avoid spending cuts, meaning the sequester cuts will be implemented today. The only positive is that the Government is obligated to give one months notice before cutting any jobs in the public sector, which leaves room for a deal to be made over the coming month.

The first report today from the USA is the Core PCE price index due at 1:30 pm GMT. Many analysts believe that this is the key inflation gauge that the Fed keeps an eye. The index is projected to show inflation remaining subdued at just 0.1%. A higher figure could cause market players to raise their eyebrows as it could give the hawks in the Fed the ammunition needed to push for a withdrawal of bond purchasing.

Later on at 2:55 pm GMT, the revised University of Michigan consumer sentiment report will be made available. No changes are anticipated, so this may prove to be a non-event.

Lastly, the ISM manufacturing PMI will be released at 3:00 pm GMT. The common consensus is that the index will decrease slightly, though it is worth noting that 4 of the past 5 releases have beaten expectations, so we may see the same happen today.


Written by Tom Tong

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