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Pound at Risk on UK GDP Revision, US Dollar May Rise on Fed-Speak

The British Pound looks vulnerable ahead of the release of revised UK GDP data while the US Dollar may rise as Fed commentary boosts 2015 rate hike chances.

Talking Points:

  • British Pound Seems to be Biased Downward on Final 2Q UK GDP Figures
  • US Dollar May Rise if Fed Commentary Bolsters 2015 Rate Hike Probability
  • See Economic Releases Directly on Your Charts with the DailyFX News App

The sentiment-geared Australian and New Zealand Dollars outperformed while the safety-linked Japanese Yen faced selling pressure as risk appetite recovered in overnight trade. The MSCI Asia Pacific regional benchmark stock index rose 2.3 percent. The move looked to be corrective after the index plunged 2.9 percent yesterday, producing the largest daily drawdown in a month and hitting the weakest level in almost three years.

Stock index futures tracking top European and US bourses are pointing sharply higher ahead in late Asian hours, hinting risk-on dynamics are likely to carry on for now. A revised set of second-quarter UK GDP figures is in focus on the data front. Economists expect the flash estimate showing a 0.7 percent quarter-on-quarter increase to be confirmed.

A print in line with expectations would cement a pickup from the 0.4 percent output increase recorded in the first quarter. Initial reports of the modest acceleration failed to stem the drop in BOE rate hike expectations against a backdrop of market tumult in recent weeks and their confirmation seems unlikely to be much more helpful. On the other hand, a downgrade in line with the recent tendency to underperform on UK economic news-flow would help validate the dovish shift in investors’ outlook, weighing on the British Pound.

Elsewhere on the docket, September’s preliminary Eurozone CPI figures seem unlikely to generate any more attention than yesterday’s analogous report from Germany. The core year-on-year inflation rate is expected to remain unchanged at 0.9 percent. The Euro may overlook the release absent a major deviation from consensus forecasts considering the results’ limited implications for near-term ECB monetary policy. Central bank officials have stressed it will not consider changing the existing stimulus mix until its December sit-down.

Later in the day, “Fed-speak” will enter into the spotlight once again. Comments from Chair Janet Yellen, St. Louis Fed President James Bullard and Governor Lael Brainard are due to cross the wires. While markets have already heard from Ms Yellen and Mr Bullard in the aftermath of September’s FOMC meetings, Ms Brainard’s views remain somewhat mysterious. This ought to make her remarks of particular interest for investors. If she joints the chorus of policymakers arguing for a 2015 rate hike – a group that seems encompass most FOMC voters (with the exception of Charles Evans) – the US Dollar may advance.

Critical Levels
CCY Supp 3 Supp 2 Supp 1 Pivot Point Res 1 Res 2 Res 3
EURUSD 1.1067 1.1154 1.1202 1.1241 1.1289 1.1328 1.1415
GBPUSD 1.501 1.5086 1.5118 1.5162 1.5194 1.5238 1.5314

 

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