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Market Brief
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Todays UK gross domestic product (GDP) preliminary data shows an increase in GDP by 1.3% in Quarter 3 (Jul to Sept) 2021 following the continued easing of coronavirus (COVID-19) restrictions. This below the market estimates of 1.5% and below the previous quarters reading of 5.5%. Showing a marked slowdown in the UK’s economy. In output terms, the largest contributors to this increase were from hospitality, arts and recreation and health following the further easing of restrictions and reopening of the economy.
From the ONS report “The level of quarterly GDP is now 2.1% below where it was before the coronavirus pandemic at Quarter 4 (Oct to Dec) 2019; we also published an article, which further examines the comparisons to pre-coronavirus pandemic levels between quarterly and monthly GDP estimates.”
The ONS are quick to point out that the coronavirus disruptions have been a drag on the economy and that manufacturing shrank, but also on their data collection, so there is a chance that these figures get revised, possibly lower.
After yesterday’s risk-off end to the US session following on from the CPI data release and poor US 30-year bond auction, the London session remains bearish on commodities and bullish the US dollar. Safe-haven currencies like the yen and Swiss franc are mixed so this really is a flight to the greenback.
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The US dollar index has clearly broken out of the trading range which had been capped by $94.50 and is making its way higher to the next level of old support that I reckon will act as resistance. $95.50 to $96.00 would be a good initial target for this currency index. This will be bad for commodities and the likes of the Antipodean currencies.
In the overnight session we received the latest Australian employment data.
The Australian unemployment rate increased to 5.2% and above analysts estimates. It is also higher than the previous rate of 4.6%. Today’s data shows that the Australian rate has now risen to its highest level in 6 months. As the central banks including the RBA need to get max employment back before they consider raising rates, this rising unemployment is a problem for the Australian dollar.
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The combination of a rising US dollar and weakening employment data for Australia is pushing the AUDUSD to the next level of market support around 0.7200-0.7250.
