Talking Points:

Pound to Fall on Ebbing BOE Rate Hike Outlook if 3Q GDP Underperforms
Yen Rose and Aussie Dollar Fell in Asia, Mirroring Slide in S&P 500 Futures
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Third-quarter UK GDP figures headline the economic calendar in European trading hours. A slowdown is expected, with output rising 0.7 percent in the three months through September compared with 0.9 percent in the prior period. UK news-flow has aggressively deteriorated relative to consensus forecasts since mid-September, hinting analysts are overestimating the economy’s vigor and opening the door for a downside surprise. Such an outcome is likely weigh against Bank of England rate hike expectations, punishing the British Pound. Needless to say, an upside surprise stands to produce the opposite results.

The safety-linked Japanese Yen outperformed in overnight trade while the sentiment-sensitive Australian Dollar proved weakest on the session. The moves mirrored a drop in S&P 500 futures, which the newswires chalked up to reports of the first confirmed case of Ebola in New York. Reports claimed markets were unnerved by swelling contagion fears considering the metropolis is the most populous US city. We suspect the move may have limited follow-through however as investors withhold commitment to a directional bias ahead of next week’s heavy-duty event risk.

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