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FOREX ANALYSIS: Pound May Rise as GDP Rebound Dents BOE QE Bets

FOREX ANALYSIS: Pound May Rise as GDP Rebound Dents BOE QE Bets

Ilya Spivak, Head Strategist, APAC

The British Pond may rise as a rebound in third-quarter UK GDP data hints the Bank of England may opt not to expand stimulus efforts next month.

Talking Points

  • UK GDP Pickup May Boost Pound as Forex Markets Downgrade BOE QE Bets
  • Japanese Yen Underperformed on Swelling BOJ Stimulus Rumors in Asian Trade
  • US Dollar Sold as Dovish Fed Posture, US Home Sales Data Buoyed Risk Appetite

Third-quarter UK GDP figures headline the economic calendar in European hours. Expectations call for the economy to add 0.6 percent in the three months through September after three consecutive quarters of contraction. UK economic data has increasingly topped expectations over recent weeks and forex traders may take a firmer GDP print to reinforce the likelihood that the Bank of England will hold off on expanding QE efforts when the latest round of asset purchases runs its course next month. Such a scenario is likely to prove broadly supportive for the British Pound. BOE Deputy Governor Charlie Bean struck just such a chord in comments relayed by the Daily Post ahead of the GDP release, saying the UK economy is “past its worst”, adding that it is time to be “more optimistic” about the future.

The Japanese Yen underperformed overnight, down as much 0.6 percent against its top counterparts, as a report from Nikkei News argued the Bank of Japan will boost stimulus efforts by ¥10 trillion next week. The US Dollar also slumped as Asian stock exchanges rose, denting demand for the go-to haven currency.

The chipper mood likely reflected an improved outlook for regional exporters after the Federal Reserve pledged to “undertake additional asset purchases and employ its other policy tools as appropriate” if its current policy mix does not substantially improve the outlook for the US labor market. A supportive US data set likewise helped boost sentiment as New Home Sales rose 5.7 percent to 389,000 in September, the most since April 2010.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

20:00

NZD

RBNZ Rate Decision (OCT 25)

2.50%

2.50%

2.50%

23:50

JPY

Corporate Service Price (YoY) (SEP)

-0.5%

-0.5%

-0.3%

2:00

CNY

Conference Board China Leading Index (SEP)

241.2

-

240.5

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:00

EUR

Euro-Zone M3 s.a. (YoY) (SEP)

3.0%

2.9%

Low

8:00

EUR

Euro-Zone M3 s.a. (3M) (SEP)

3.1%

3.2%

Low

8:00

EUR

Italian Hourly Wages (MoM) (SEP)

-

0.1%

Low

8:00

EUR

Italian Hourly Wages (YoY) (SEP)

1.5%

1.6%

Low

8:30

GBP

Gross Domestic Product (QoQ) (3Q A)

0.6%

-0.4%

High

8:30

GBP

Gross Domestic Product (YoY) (3Q A)

-0.5%

-0.5%

High

8:30

GBP

Index of Services (MoM) (AUG)

0.3%

1.1%

Low

8:30

GBP

Index of Services (3Mo3M) (AUG)

-0.3%

0.1%

Low

9:00

EUR

Italian Retail Sales s.a. (MoM) (AUG)

-0.2%

-0.2%

Low

9:00

EUR

Italian Retail Sales (YoY) (AUG)

-

-3.2%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2931

1.3040

GBPUSD

1.5967

1.6119

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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