Good morning,
Yesterday began with a somewhat downbeat reading on the UK figure front, as GDP grew at its slowest rate in Q3 since 2010, with a stronger July figure and a contraction in the following two months. This reading, combined with the report last week detailing business investment coming in around 11% lower than if Brexit had not been voted on, paints a struggling picture.
However, markets seemed more fixated on the fact that we have technically avoided “being in recession” and supported the pound with some upward momentum. The GBP strength was then embellished with a 0.8% jump on the USD, as the Brexit party leader Farage stated that they would not contest the Conservatives in crucial seats, increasing the odds of a conservative victory and thus, hopefully, a timely agreement being achieved.
Today will be another data-driven day, with UK employment stats released 09:30 GMT, swiftly followed by German ZEW business confidence at 10:00. Both will be important readings, as markets will be keen to see how the UK labour economy is faring in the face of reduced business investment, whilst Germany will be focused on the sentiment following some alarming data readings and concerns of a manufacturing-led recession. This will be a strong indicator leading up to the GDP figures for Germany come Thursday.
EURUSD will likely be at the mercy of the reading with an element of upside potential resting on this should the bottom of the slowdown be found and a more upbeat outlook in the face of easing trade uncertainty.
Have a great day.