The UK’s monthly GDP report registered the economy with a modest growth of 1.8% in May compared to 5% expected and the previous month's coronavirus-induced sharp contraction of 20.3%. The softer reading negated upbeat manufacturing production data, which arrived at +8.4% MoM in May against a fall of 20.9% expected and -24.4% booked in April.
Sterling maintained its offered tone against the Dollar near session lows, around the 1.2550 that alongside a rather muted reaction to the data release from the UK. The pair extended the previous day's slide and remains depressed even with modest US dollar strength.
Against the Euro, the Pound also dipped following the release of mixed UK data and is currently trading around the 1.10 mark.
Economic activity increased in almost all districts in the USA but remained well below where it was prior to the COVID-19 pandemic, the US Federal Reserve (Fed) noted in its Beige Book. Consumer spending also picked up as many nonessential businesses were allowed to reopen. Retail sales rose in all districts, led by a rebound in vehicle sales.
The US Dollar Index largely ignored these remarks and was last seen losing 0.1% on the day. Meanwhile, Wall Street's main indexes were up between 0.67% and 1%, reflecting a slight improvement in risk sentiment.
The Euro is heading very positively into the European Central Bank rate decision due for release later today. The common currency against the Dollar is at a near 1% gain week-to-date gain with further bullish strength looking the more likely. The ECB is expected to keep policy on hold as the impact of recent measures unfolds and the pace of the economic recovery remains uncertain
Various market analysts have implied the recent strength in the Euro is a sign that investors are expecting member nations to reach a compromise close to Germany and France's proposal of a 750-billion euro fund, which will deliver 500 billion euros as grants and guarantees and 250 billion in loans. Any deal agreed close to this plan could likely see the Euro test the 2020 high just below the 1.15.
Data to watch
06:00 - GBP - Claimant Count Change
08:30 - GBP - BOE Credit Conditions survey
11:45 - EUR - Main Refinancing Rate
11:45 - EUR - Monetary Policy Statement
12:30 - EUR - ECB Press Conference
12:30 - USD - Core Retail Sales
12:30 - USD - Retail Sales
12:30 - USD - Philly Fed Manufacturing Index
12:30 - USD - Unemployment Claims
Posted in Daily Market News on Jul 16 2020