Economic feedback from the UK overnight showed the economy remains in a recessionary state with Gross Domestic Product released showing a decline of 0.2 per cent in the third quarter, representing an annual contraction of 5.1 per cent. The UK current account deficit also widened to GBP 4.7 billion in the third quarter against a steep downward revision of GBP-4.4 billion in the second quarter. The ensuing minutes saw sterling slide to flirt around the US$1.60 mark, with subsequent US economic data pushing sterling through the physiological barrier to reach 10 week lows of US$1.5921.
US Gross Domestic Product rose less than expected recording annualised growth of 2.2 per cent in the third quarter, against expectations of a 2.8 per cent rise. The latest growth data may suggest the economic recovery is not as strong as earlier estimates suggest, however the market remained confident the latest data is pointing to a stronger result in the further quarter. The greenback gathered strength in anticipation of the US GDP figures, but momentum quickly slowed as the worse than expected figures were released. The upward trajectory was resumed on the back of outperforming US Existing Home Sales which surpassed expectations to rise 7.4 per cent in the month of November representing the highest level in three years.
For the second day running, overnight movements on the greenback tracked outperforming equity markets which finished the day firmly in the black. The US dollar index which measures the value relative to six major foreign currencies rose 0.3 per cent to close at 78.28. The Aussie dollar has continued to weaken in the domestic session falling to fresh 11 week lows of 87.5 US cents overnight. A continuance of this dollar-positive shift in sentiment certainly narrows the window of opportunity for the strength of the local unit, as traders bet on a winding back of economic stimulus in the US, in-turn sooner than expected interest rate hikes. With greenback momentum looking likely to continue, coupled with low liquidity due to Christmas holidays - upside for the Aussie appears to be limited coming into year end.