Euro lost ground against the major crosses with selling pressure evident due to a weak GDP result for Q2 (-0.2%). This is the worst quarterly result since the euro inception in 1999 and fuels fears that the region will fall into a technical recession if we see another contraction in Q3. Other Euro zone news saw CPI come in at 4%, just missing consensus of 4.1%. This result compounded sentiment that the ECB would abandon its hawkish stance on interest rates in order to combat lowering growth prospects, and with the headache of inflation easing slightly, the market seems to have priced in lower chances of a rate hike.

The US inflation story was antithesis of Euro zone news with CPI rising to 0.8% in July, twice the consensus rate. This adds to weight to the case for a possible hike in the near term and added buying pressure. However, a poor jobless claims result added some downside pressure and oil prices continued to fluctuate.  Equity markets remained confident that recent falls in commodity prices, particularly oil, will ease the long term inflation concerns and rose slightly on the day.

The pound continued its march downward early in the day, dropping to a 22 month low against the dollar, as negative sentiment continued following the BoE’s statement. It managed to recoup those losses slightly later in the day, but this morning it has returned to continue its downward trend

News out today will be concentrated on the US, with Consumer Confidence figures, Industrial Production and Manufacturing PMI all expected out this afternoon

Have a great weekend

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Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our:Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.