The market forex signals is displaying it is in a risk-off mood after a especially weak UK GDP report and misses in Australian and Canadian inflation information. The Swiss franc stands out as the top performer whilst the pound is lagging terribly.
Heading into the week there have been various event risks revealed with regards to the UK. Predominantly there’s inflation facts, the Bank of England minutes plus a presentation from BOE Governor Mervyn King. The additional risk was from GDP however it was a doozie – slipping at a 0.5% pace in the fourth quarter when compared to the +0.5% that had been anticipated. The soft quarter dropped the year-over-year performance of the UK economy to 1.7% from 2.7% and was much below the 2.6% predicted.
GBP/USD is down more than 200 pips after the dreadful report. It’s very uncommon for GDP to miss so severely. Cold December climatic conditions was a mitigating factor however even taking out the downturn in that month, the Office of National Statistics said progress would have been “flattish.”
In Australia, inflation details fell short of estimates and that will likely drive the RBA to the sidelines a bit longer than market individuals were expecting. The CPI climbed 0.4% in the fourth quarter when compared to to the 0.7% expected. The Australian dollar is the second-worst performing G10 currency.
A similar story played out in Canada in which the December CPI was flat when compared to the 0.1% rise predicted. Eliminating food and energy, prices fell 0.3% in comparison to the 0.1% anticipated. The stats get rid of any stress on the Bank of Canada to increase interest rates.
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