Steady British Economic Growth

Paresh Davdra is the Dealing Director of RationalFX, Currency Specialists. Tuesday 16th December 2014 09:41 EST

British economic growth held steady at a quarterly rate of 0.7% in the three months to November, on track for a robust end to the year, an estimate from the National Institute of Economic and Social Research showed the NIESR said Growth for 2014 as a whole remains robust and consistent with our most recent quarterly forecast.

The Figures for the UK trade balance were released it shows that Britain’s trade deficit narrowed to a seven-month low in October, as the country imported less oil and exports climbed. The trade deficit dropped to £2bn in October from £2.8bn in September, the lowest since March.

The Office for National Statistics said exports rose by £200m between September and October to £24.3bn, mainly owing to higher exports of erratic items, notably silver exports to India. Imports fell by £700m in October, driven by lower oil imports from countries outside the EU, returning to more normal levels after September’s high, the ONS said.

The report showed growth rates were lifted by London and the south east. “After a temporary hiatus in at the highest risers of the property market, growth has rallied again in the capital – with values in prime spots such as Kensington and Chelsea, and Hammersmith and Fulham surging 5.3 per cent over the course of the month, hitting new price records along the way,”  EUR. Not much data was released within the Euro zone, the main topic was around Greece who brought forward their presidential elections after a two-month bailout extension was agreed and they now have until February to pay back lenders. This slightly weakened the Euro again as it weakened consumer confidence in Europe especially as Greece had recently been publishing positive data.

Earlier last week we had figures from Germany regarding their trade balance which came in much better than expected. The reading is a balance between exports and imports of total goods and services. The figure increased to €20.6bn from €18.6. It was actually expected to come out lower at €18.5 which is a good reading for Germany considering its recent publications.

Greece recorded its biggest one day fall since 1987 following a surprise decision to bring forward a presidential vote to next week - which could trigger early elections if Prime Minister Antonius Samaras fails to get his candidate chosen. Furthermore Greek 10 year bond yields jumped above 7% to stand at 7.729%, 7% is considered a danger zone level where a country’s borrowing costs are not affordable.

The second allotment of the targeted long-term refinancing operation came in at 129.84 billion Euros ($162 billion), according to the bank, narrowly missing economist’s median expectations of 130 billion Euros. The news was regarded as being euro positive as it indicates that there may be a delay to any quantitative easing (QE) program. USD In the US there was a small speech held by the Federal president of Atlanta (Dennis Lockhart) who said the US Federal Reserve should be on track to raise interest rates in the later half of 2015. He suggested that with the recent improvements in the economy, including the jobs market, it was a concern that inflation had not yet picked up.

Also, the way the economy is going at the moment he can see the US normalizing interest rates in 2015. This slightly weakened off the Dollar after it had gained some momentum it mainly due to the much better than expects non-farm payroll readings.

US had figures showing home mortgage approvals which rose last week due to both purchase and refinancing applications increasing by 7.3% in the week ended Dec 5 according to the Mortgage Bankers Association.  The Dollar lost ground against the Pound despite positive retail and unemployment figures being released after Federal Reserve disagreements over the budget surfaced.

The number of Americans filing for unemployment benefits fell to a three-week low as an improving economy limited dismissals, showing companies are retaining staff and hiring at the strongest pace since 1999 as they try to meet stronger demand for their goods and services.

Retail sales rose in November by the most in eight months, indicating continued labour market progress is bolstering confidence and spending prospects during the holiday-shopping season, another report showed. A last-ditch revolt against Wall Street efforts to overturn key banking reforms is threatening to derail passage of the $1.1 trillion US budget through Congress just hours before funding for the federal government is due to expire U.S. consumer sentiment rose in December to a near eight-year high on improved prospects for jobs and wages and on lower oil prices, figures released.

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