Market Report - 10/03/2023
UK economy beats market expectations for growth; Non Farm Payroll tops estimates yet again
It’s a data heavy day on the economic calendar, with many potentially market moving risk events taking place.
The Office for National Statistics reports that GDP grew by 0.3% during January, after shrinking by 0.5% in December. That’s a faster recovery than expected after the economy stalled in the final quarter of 2022. Analysts had expected modest growth of just 0.1%, as strike action and the cost of living crisis prevented a recovery in consumer and business activity.
The latest GDP figure could give the chancellor, Jeremy Hunt, a slight boost before next week’s budget, when he will set out the government’s tax and spending policies. January's economic growth was driven by increased activity in the services sector which grew by 0.5% in January 2023, after falling by 0.8% in December 2022.
The largest contributions to growth in January 2023 came from education, transport and storage, human health activities, and arts, entertainment and recreation activities, all of which have rebounded after falls in December 2022.
On the back of this, GBP was up across the board. GBPEUR saw significant improvement as it ticked up to highs of 1.1333, which was substantially higher than the daily low of 1.1247.
GBP/USD also saw some resurgence following a rather underwhelming week. The pair opened at 1.1927 before seeing an uptick to trade above 1.20 for the first time in a week. Investors and analysts will be keeping a keen eye on US Non Farm payroll data later for fresh impetus on the cable pair.
EUR/USD has been seen to be treading water at around 1.0600 in the European session on Friday, prior to the Non Farm Payrolls report. The pair is defending minor gains amid a modest pullback on the USD. Nevertheless, the cautious market mood ahead of the February jobs report from the US limits the pair's upside and much like GBP/USD.
Job creation across the US slowed last month, but more jobs were created than expected. The Non-Farm Payroll rose by 311,000 in February, rather stronger than the 205,000 which was expected. That follows a (downwardly revised) 504,000 in January. January’s non-farm payroll increase had initially been estimated at 517,000 jobs last month. Despite this, the US unemployment rate has edged up to 3.6% for February, with the number of unemployed persons rising to 5.9 million, the Bureau of Labor Statistics reports.