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29 Jan 2016

Dollar Possibly Under Pressure Today After GDP Data

Sterling has seen some support over the past 24 hours, aided in part by a pickup in UK GDP in Q4. Cable is up near $1.44, while EUR/GBP is back below 76p. Meantime, EUR/USD is broadly unchanged on the day, trading around $1.09.

In the Eurozone, we get two key releases from an ECB policy deliberation perspective (January HICP and December M3 money supply). The data could have some bearing on the euro today.

Dollar-wise, we get the key US data release of the week, the Q4 GDP report. Annualised growth is expected to have slowed (0.8% from 2%), while core PCE (Fed’s preferred measure of inflation) looks to have remained well below its 2% target. Thus, the dollar could struggle for upward momentum.

Spain reached growth of 3.2% in 2015

During 2015, Spain had ten months of growth which pushed it into one of the top performing Eurozone nations. This growth while not categorised by the Spanish statistics office, is believed to have been focused around consumer activity. Mainly due to stronger jobs growth, reduction in oil prices and renewed confidence in the Spanish economies future.

The Spanish government expects growth of 2.9% for 2016 which is well ahead of the 1.8% average across the nineteen nation Eurozone.

The devil is in the detail for French Growth

Last year the French economy grew by 1.1% which lagged by Germany at 1.7% and England at 2.2%. During the fourth quarter, the French economy grew by 0.3% however the Paris attacks occurred during mid-November. As a result, consumer spending for flights or hotel accommodation lagged as both Air France-KLM group and Accor (Hotel group) experienced a lack in demand for their services.

However corporate investment increased to 1.3% for the quarter, its biggest quarterly increase since fourth quarter 2013. Additionally the French economy still has high unemployment of 10%, which once this figure begins to fall further could spur the extra growth required.

Grexit possibility is over according to central Bank Chief

Australian Dollar broke through (USD) 71 cents

This morning the Australian Dollar experienced a new high of around 71 cents after starting the week at $0.6937. The recent rise was due to dismal US durable goods data which supports the view that the US economy could be under pressure.

If today’s US GDP figures disappoint then we could see the Australian Dollar rise further. Keep a watch over the next twelve to eighteen hours regarding the AUD/USD rate.

 

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