UK GDP data outstripped expectations on Thursday while one of the UK’s biggest car maker, Nissan, said it was investing more in Britain despite Brexit. Yet Sterling hardly moved against both the euro and US dollar and there are two explanations for this. Firstly, UK GDP came in at 0.5per cent q/q for Q3, down from 0.7per cent in Q2 but well above the estimated drop to 0.3per cent. But when you dig deeper there was a worry collapse in manufacturing and construction. Secondly, there are question marks about Nissan’s secret talks with UK PM Theresa May.

Thursday’s good UK GDP news also caused a rise in UK gilt yields suggesting a reduced risk of the Bank of England cutting interest rates on ‘Super Thursday’ next week.

So why did sterling not rally this week? Probably because sterling has become the most political major currency in the world (unless Donald Trump wins the US election). Brexit means a regime change – and right now we don’t know what regime UK PM Theresa May is taking us towards and traders are struggling to quantify this political risk.

USD: US GDP a key trading point

Yesterday all eyes were on the first estimate of US GDP covering Q3. Consensus expectations, according to a Reuters survey, was that the data would show the US economy grew by 2.5 per cent year on year, up sharply from the 1.4 per cent growth rate in the previous quarter.

Developments ahead of the US election event risk on November 8 is an important consideration. However, if there was a robust GDP report yesterday, not only will this increase the probability of a US interest rate hike on December 14, but it may also start to impact hawkish expectations of further rate hikes in 2017.

Ahead of yesterday’s US GDP report the US dollar has already gained by 3.2 per cent against the euro this month from $1.1250 to around $1.0900 today. The $1.0850 price area represents resistance to further gains for the US dollar but what it also means is that if broken, it can act as an accelerator for further USD appreciation.