UK GDP Boosts Cable
UK GDP came in well above consensus at 1.0% q/q (cons. 0.6%) boosting Cable by 70 pips. This fresh upside follows yesterday’s gains after Prime Minister Cameron indicated that UK economic data would continue to improve. Our UK economist reacted to the GDP report by abandoning his call for an expansion of Gilt purchases at the forthcoming Bank of England meeting on Nov. 8. He sees this as a pause though rather than a full-stop to the QE program – a pattern that is not without precedent (either in the UK or the US). After all, the Olympics was a one-off event which was key reason for the positive data surprise. EURSEK nudged higher too after the Riksbank kept policy settings unchanged while lowering the repo rate path and cutting the 2013 CPI estimate to 0.7% from 1.3%. USDJPY finally burst through 80.00 overnight – next week’s Bank of Japan policy meeting is now sharply in focus and the Nikkei newspaper further stoked easing expectations reporting that a JPY 10 trn increase in the APP is under consideration. Yen selling out of Tokyo earlier was also inspired by supportive technicals and the anticipation of outward Toushin outflows. Earlier, S&P took a number of ratings actions on several of Australia’s regions. New South Wales had its AAA rating affirmed, but the outlook was lowered to negative from stable. Western Australia suffered the same fate. However, the State of Victoria’s rating was affirmed at AAA, outlook stable. The Australian dollar was indifferent to the headlines however. US durable goods orders will be closely watched today after they plunged in August – a decline that was widely blamed on anticipation of the forthcoming fiscal cliff.
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UBS Investment Bank