The pound had a really good run during today’s morning London session, apparently because of net positive economic data ahead of next week’s BOE statement.
As for the other currencies, most showed decent volatility but had two-way, choppy action, which makes the pound the only real mover during the session.
- Swiss jobless rate: 3.0% vs. steady at 3.2% expected
- German trade balance: €19.5B vs. €21.0B expected, €22.3B previous
- French industrial production y/y: 3.7% vs. 3.6% expected, 2.6% previous
- French manufacturing production y/y: 3.9% vs. 4.2% expected, 3.3% previous
- U.K. industrial production y/y: 0.4% vs. as expected, 0.3% previous
- U.K. manufacturing production y/y: 1.9% vs. 1.7% expected, 0.6% previous
- Construction output in the U.K. y/y: -0.4% vs. 0.2% expected, 0.9% previous
- U.K. goods trade balance: -£11.58B vs. -£11.95B expected, -£11.53B previous
Net positive U.K. data
The U.K. released a slew of economic data and they were net positive overall.
First up is total industrial production in the U.K. during the July period, which increased by 0.4% year-on-year as expected and faster the previous month’s 0.3% rise.
The stronger annual reading was driven mainly by manufacturing output surging by 1.9%, which is a stronger increase than the +1.7% consensus and is significantly faster than the 0.6% rise during the previous month.
The surge in manufacturing output, in turn, was driven by the 7.6% jump in production of transport equipment.
Moving on, another positive economic report was the U.K.’s trade data since that showed that the U.K.’s trade gap narrowed between June and July, from £2.91billion to £2.87 billion, even though the trade deficit in goods widened slightly from £11.53 billion to £11.58 billion.
But even the wider deficit in goods traded is still smaller compared to the consensus that the deficit would widen to £11.95 billion, so that’s still somewhat positive.
Also, the overall trade deficit in Q2 is smaller compared to Q1, which may lead to an upward revision for Q2 GDP growth.
The only disappointing report during the session was that construction output in the U.K. fell by 0.4% year-on-year instead of rising by 0.2% as expected. This marks the fourth consecutive month of negative annual readings, but won’t have a significant impact on Q2 GDP revisions.
Reuters released a report during the session. And according to this report, “two sources with direct knowledge of the discussion” over at the ECB divulged that ECB officials “were in broad agreement their next step would be to cut bond purchases, with four options under consideration.”
One such option shared by Reuters was the possibility of extending the ECB’s QE progrtam by six or nine months but tapering monthly pace from €60 billion to just €40 billion or even €20 billion.
Whether it was just post-ECB exhaustion or something else, the rumor didn’t seem to spark a frenzy of euro buying, however, since the euro’s price action was mixed and mostly choppy during the session.
Major Market Mover(s):
The pound was the best-performing currency of the session, apparently because of net positive economic data. Although short-covering ahead of next week’s BOE statement is also a possibility, as alleged by some market analysts.
GBP/USD was up by 79 pips (+0.61%) to 1.3213, GBP/CHF was up by 92 pips (+0.76%) to 1.2497, GBP/AUD was up by 98 pips (+0.60%) to 1.6308
Watch Out For:
- 12:30 pm GMT: Canada’s net change in employment (+15.0K expected, 10.9K previous) and jobless rate (steady at 6.3% expected); read Forex Gump’s Preview on that here
- 12:30 pm GMT: Canada’s utilization rate (84.9% expected, 83.3% previous)
- 12:45 pm GMT: Philadelphia Fed President Patrick Harker will speak
- 2:00 pm GMT: U.S. final wholesale inventories (0.4% expected, same as previous)
- 7:00 pm GMT: U.S. consumer credit ($15.1B expected, $12.4B previous)