FX round-up: Q4 GDP data lifts pound, trade concerns simmer in background
Sterling continued grinding higher against the US dollar at the end of the week, helped by a stronger-than-expected reading on economic growth at the end of 2017 - as service sector activity picked-up - and, according to analysts, simmering concerns about the risk for increased trade frictions going forward.
"While President Trump's comments [on Thursday, in support of the currency] prompted a short covering rally in the US dollar, they won't have alleviated investors separate concerns about recent belligerent US rhetoric on trade," said Michael Hewson at CMC Markets UK.
According to ONS, Britain's gross domestic product expanded at a 0.5% clip quarter-on-quarter over the three months ending on 31 December (consensus: 0.4%), meaning GDP grew by 1.8% over the course of 2017.
Friday's GDP reading saw the pound edge higher by 0.13% against the greenback for the day, closing at 1.4160, and by 2.18% over the week as a whole.
In the background, the US dollar spot index was again sliping lower, losing 0.36% to 89.067.
A slightly weaker than anticipated print on US fourth quarter GDP also appeared to weigh on sentiment, with the Department of Commerce reporting that the economy grew at an annualised pace of 2.6% in the last quarter of 2017, which was a tad below the 3.0% that economists had penciled in.
Nonetheless, one of the main drags on US GDP last quarter came from inventory accumulation (which subtracts from growth), which took seven tenths of a percentage point off the headline rate of growth.
Furthermore, and as economists at Barclays Research pointed out, final domestic demand (GDP minus inventory growth and foreign demand) accelerated to a pace of 4.3%, more than doubling the previous quarter's reading of 1.9%.
It was also the strongest reading since 2014.
In other data, Commerce reported that durable goods orders rocketed at a 2.9% month-on-month pace in December to reach $249.5bn, easily outpacing economists' forecasts calling for a rise of 0.9%.
Although the data was boosted by strong prints in the oft-volatile categories of defence capital goods orders (19.5%) and non-defence aircraft and parts (15.9%), economists at Barclays Research noted the upwards revisions to November's data, telling clients that "all-in-all" durable goods orders ended the quarter "on a strong note".