Talking Points:

Aussie, Kiwi Dollars Drop After Disappointing Australian 3Q GDP Report
British Pound Looks to Composite PMI Data to Inform BOE Policy Outlook
US Dollar May Rise as Upbeat Fed Beige Book Keeps Rate Hike Bets Alive

The Australian Dollar underperformed in overnight trade, falling as much as 0.6 percent, following a disappointing GDP data showing the economy added just 0.3 percent in the third quarter. That marked the smallest increase since the first quarter of 2013 and fell short of forecasts calling for a 0.7 percent increase.

The Aussie’s descent tracked a drop in Australia’s benchmark 10-year bond yield, hinting the soft outcome weighed on RBA monetary policy expectations. Indeed, a gauge of the priced-in outlook from Credit Suisse shows markets are now leaning toward seeing at least one interest rate cut over the coming 12 months.

The New Zealand Dollar followed its Oceanic counterpart downward. Australia is New Zealand’s largest trading partner and a slowdown there warns of ebbing cross-border demand ahead, which bodes ill for the island nation’s growth and monetary policy prospects.

November’s UK Composite PMI data headlines the economic calendar in European hours. The index is expected to register at 56.2, marking the first acceleration in manufacturing- and service-sector growth in three months.

UK news-flow has cautiously improved relative to consensus forecasts over recent weeks, hinting that analysts are underestimating the economy’s vigor and opening the door for an upside surprise. Such an outcome may fuel bets on the relatively sooner onset of BOE interest rate hikes, boosting the British Pound.

The spotlight then turns to November’s US ADP Employment report and the ISM Non-Manufacturing Composite figure. The former is seen showing the pace of job creation (+222K) slowed compared with September (+230K) while the latter reflects a pickup in service-sector activity growth (56.5 vs. 56.3 prior).

US data outcomes have been broadly stable relative to consensus forecasts since early October. This means realized results will probably register close to expectations, leaving the US Dollar torn between conflicting cues. An upbeat Fed Beige Book survey of regional economic conditions may be a tie-breaker, sending the greenback higher amid firming Fed rate hike bets.

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