Overnight data saw NIESR project UK GDP expanded 0.1% in the three months to July, putting annualized growth rates at the slowest in at least 15 years. The economic calendar is conspicuously bare in the forthcoming session. With an equally quiet calendar on tap for US hours, price action may revert to momentum-driven trading, thus opening the door for considerable uncertainty ahead of tomorrow’s back-to-back policy announcements from the Bank of England and the ECB.
[B][U]Key Overnight Developments[/U]
• NIESR Sees UK GDP Growth at 3-Year Low in July
• Euro Retraces to 1.55 in Overnight Trading
[U]Critical Levels[/U][/B]
The Euro climbed higher overnight to re-test 1.55 having reached as low as 1.5442 in US trading. DailyFX Senior Currency Strategist Jamie Saettele expects the pair to decline below the 1.5283 level. Near-term support now stands at 1.5440 with resistance at 1.5549. Sterling kept to a wide range, trading between 1.9570 and 1.9520. Support is now stands at 1.9364, with near-term resistance at 1.9770.
[U][B]Asia Session Highlights[/B][/U]
NIESR released their growth estimate for [B]UK Gross Domestic Product[/B], saying output expanded 0.1% in the three months to July. While this puts annualized growth rates at the slowest in at least 15 years, NIESR contends that the Bank of England will not cut interest rates to support growth with inflation substantially above target levels.
[B]Nationwide Consumer Confidence[/B] also disappointed, underperforming expectations to print at 51 in July, the lowest level in at least four years. The accompanying statement cited the weakening housing market, rising living costs, and increasing chances of recession as the reasons for the slump in sentiment.
On balance, UK economic conditions may see some improvement as the effects of falling crude oil prices filter into the broad economy and ease price pressures. This could give Mervyn King and company room for monetary easing and encourage growth. Traders will closely monitor the language of the upcoming Bank of England policy announcement for signals alluding to when a rate cut may be expected.
Preliminary estimates of the June figures for Japan’s [B]Leading and Coincident Indices[/B] declined largely in line with expectations. USDJPY ignored the releases, keeping to a tight 20-pip range in overnight trading.
[U][B]Euro Session: What to Expect[/B][/U]
The economic calendar is conspicuously bare in the forthcoming session. German Factory Orders are expected to match the 5-year low at -4.7% in the year to June. A validation of the downside scenario is likely as Manufacturing PMI now stands at the lowest since the survey’s inception.
With an equally quiet calendar on tap for US hours, price action may revert to momentum-driven trading, thus opening the door for considerable uncertainty ahead of tomorrow’s back-to-back policy announcements from the Bank of England and the ECB.
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