A better-than-expected U.K. GDP growth boosted the British pound across the board earlier today.
Will this lead to EUR/GBP breaking its short-term downtrend?
Before moving on, ICYMI, yesterday’s watchlist checked out USD/JPY’s uptrend ahead of the U.S. CPI release. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. weekly initial jobless claims: 248.0k (229.0k forecast; 227.0k previous)
U.S. CPI for July: 3.2% y/y (3.1% y/y forecast; 3.0% y/y previous); Core CPI at 4.7% y/y (4.8% y/y forecast/previous)
San Francisco Fed Chief Daly says Fed still has more work to do on controlling inflation and that Thursday’s CPI numbers came out largely as expected
BusinessNZ’s manufacturing PMI slipped further into contraction to 46.3, the lowest since August 2021. “July result showed very little signs of potential improvements for the sector as a whole”
New Zealand’s food price index dipped by 0.5% m/m in July vs. 1.6% m/m in June marking its first decline since February 2022
China to allow provincial-level governments to raise about 1 trillion yuan ($139 billion) via bond sales to repay the debt of local-government financing vehicles
U.K. economy records surprise growth, up by 0.2% q/q in Q2 (vs. 0.1% in Q1, 0.0% expected), aided by growth in household spending and manufacturing output.
Price Action News
There were not a lot of top-tier economic reports scheduled during the Asian session, so traders had time to price in New Zealand printing a gloomy private business outlook report.
Of course, it didn’t help risk assets that traders were also pricing in a hawkish remark by Fed member Daly as well as their concerns over China’s provinces taking on debt.
NZD extended its slide from yesterday’s U.S. session and made new intraweek lows by the start of European session trading.
Upcoming Potential Catalysts on the Forex Economic Calendar:
U.S. PPI reports at 12:30 pm GMT
U.S. preliminary UoM consumer sentiment at 2:00 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
USD/JPY: 15-min
In case you missed it, the U.K. printed a better-than-expected GDP report in Q2. The gains were broad-based and showed strength for the economy’s consumer spending and manufacturing activities.
A surprisingly strong economy would give room for the Bank of England (BOE) to tighten its monetary policies further. This is probably why GBP gained across the board and dragged EUR/GBP from its .8665 intraday highs.
The pair is now trading closer to .8650, which is where we can find the 15-minute Pivot Point line and 100 SMA as well as the 38.2% Fibonacci retracement of the last biggest upswing.
A bounce from the support level opens EUR/GBP to a move back to its .8670 previous highs. We could even see new intraday highs if there’s enough bullish momentum!
Of course, whether or not GBP extends its bullish momentum may depend on top-tier reports like the U.S. PPI data due later.
If concerns for higher Fed rates translate to European equities weakness, then EUR/GBP may still dip below the support level that we’re watching.
