Sterling showed little reaction to data released this morning which showed that the UK economy had slowed more than previously thought in the July-September period. Gross Domestic Product showed the economy increased 1.1% in the third quarter, weaker than the 1.3% estimates as global supply chain problems weighed on manufacturers and building firms. Prime minister Johnson said on Tuesday that he would not be introducing new Covid-19 restrictions in England before Christmas, but the situation remained difficult, and the government might need to act afterwards. The UK Health Security Agency is set to publish real-world data on the severity of Omicron, which is expected to say that more people are likely to have mild illness with less symptoms, but not necessarily mild enough to avoid large numbers of hospitalisations.
The euro has failed to attract buyers against the dollar in early trading, snapping a 2-day uptrend. The single currency lost ground after European Central Bank board member Isobel Schnabel said this morning that the normalisation of monetary policy will be gradual and reiterated that inflation is expected to decline over the course of next year. Germany and Portugal said yesterday it will impose new measures to curb rising Covid cases. Germany said it will limit private gatherings and close night clubs ahead of the new year while Portugal said it will be mandatory for people to work from home and bars and clubs will be shut from Saturday. French producer prices accelerated in November rising to 3.9% up from 2.9% in the previous month.
Although the improving market sentiment made it difficult for the dollar to find demand on Tuesday, the currency has managed to stay resilient against its major rivals with the benchmark 10-year treasury bond yield rising toward 1.5% and the dollar index remaining in positive territory. Later in the day, the US Bureau of Economic Analysis will release the final revision of annualised third quarter growth, which is expected to remain unchanged at 2.1%. The Conference Board will also publish the December Consumer confidence report and in late trading the dollar will likely take its lead from those data releases.
13:30 USD GDP Annualised (Q3)
15:00 USD Consumer Confidence (Dec)