More evidence that the economic recovery in the UK is gathering pace as preliminary data for Gross Domestic Product declined less than initial estimates, falling 0.3 percent for the third quarter which represents a 5.1 percent contraction on year. Initial estimates indicated the economy would shrink by 0.4 percent. The Bank of England has predicted the UK economy will return to growth this year, with an increase of 2.2 percent in the fourth quarter.
To the states and in a lightly traded session ahead of Thanksgiving holiday, US equity markets squeezed out moderate gains as investors found confidence in the latest economic data released. As investors shunned the relative 'safety' of the greenback, the balance of risk fell with higher yielding investments with commodities, metals and energies which placed further weight on the ailing greenback.
New Home Sales was the standout performer last night, rising 6.2 percent with 430,000 new houses sold for the month of October, well in excess of the estimated 0.8 percent rise or 407,000 sold. We also saw Initial Jobless Claims outstrip forecast falling to 466,000 for the week of the 21st of November, against expectations of a fall to 500,000 new benefits lodged. Continuing claims also beat expectation coming in at 5.423 million from a revised 5.613 million the previous week.
The Reuters/Michigan Consumer Sentiment Index fell in the month of November to a level of 67.4 from 70.6 in October, still beating the consensus of a reading of 67.1. Personal Consumption expenditure also rose 0.7 percent for the month of October, from a downwardly revised -0.6 percent in September. Economists expected a rise of 0.6 percent. US Durable Goods orders for October fell 0.6 percent against a consensus of a 0.5 percent rise.
Meanwhile, gold has surged to another all time high this morning, at the time of writing continues to strengthen trading at US$1,192.5 an ounce. Although we can attribute the latest burst of energy from gold to a variety of factors, a supporting factor undoubtedly remains with Central banks as they seek to load up on Gold to combat the falling US currency. Overnight the driving factor was speculation India is looking to top up Gold reserves.
We also need to take into account the effect a weak greenback has on competing economies. By default, a weak dollar provides US exports with a competitive edge, thus a negative influence on other economies with 'free floating' currencies. This forces central banks to stock up on dollar reserves to stem the negative effect of the weak greenback on respective economies. We then see the cycle continue as the urgency for central banks to hedge USD exposure increases. Meanwhile, the fed's stance on monetary policy continues to fuel speculation of a dollar demise, with US policy makers intending to keep record-low interest rates on hold for an extended period, amidst a global recovery.
The Aussie dollar has been a beneficiary of the surge in commodities, currently trading at session highs of 93.2 US Cents. A bullish outlook on the Australian Economy by Reserve Bank deputy governor Ric Battellino yesterday has also kept the Aussie in good stead.