The pound suffered a cruel blow on Friday after UK growth figures came in well below expectation. UK Gross Domestic Product for the third quarter fell 0.4 percent against the consensus of a 0.2 percent rise, representing a yearly decline of 5.2 per cent.
This now marks an unprecedented sixth consecutive quarterly contraction of the UK economy, leaving investors to question just how slow and protracted the recovery will be. Thursday's data also disappointed with Retail Sales data for September showing no change for the second consecutive month against a market consensus of a 0.5 percent rise.
In the volatile minutes after the release the UK currency collapsed three big figures against the greenback to the low US$1.63's. Despite an attempted recovery, the remaining hours of trade saw a continual decline of the pound to wrap up the week at US$1.6303 near session lows.
To the US and housing data outstripped expectation on Friday with Existing Home Sales for September rising 9.4 percent, versus a consensus of a 5 percent rise. The surge can be attributed to investors rushing to take advantage of a tax credit for first home buyers before expiry in November. In a turn of events, the better-than-expect figures failed to result in a risk fuelled dollar sell off; instead we saw greenback strengthen against major currencies coinciding with a fall in US equities, despite upbeat earnings from Microsoft and Amazon.
The US Dollar index which measures the dollar's value relative to six major counterparts closed just off session highs at 75.47 representing a .49 percent rise on the day. The Aussie's movements were largely reactive to greenback strength on Friday finishing down 38pts on the day, however we expect some mild strength ahead of local economic indicators which include Producer Price Index for the third Quarter which is expected to grow 0.3 percent compared to the previous 0.8 percent decline. The stage is set for a big week on the local currency highly reactive to the host of key data from states, namely third Quarter GDP for the US which is expected to show growth of 3.2 percent after four consecutive quarterly contractions.