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Eurozone grows at twice the pace of the UK

Brexit talks still have long way to go as Salzburg summit turns sour

Eurozone GDP grew at double the pace of the UK for the last quarter according to data released yesterday. The Data shows that the Eurozone economy expanded by 0.6% quarter and quarter and 2.1% year on year. This compared to the UK economy that only grew 0.3% in its previous quarter. This followed on from stronger than expected employment data on Monday and has seen the Euro to continue to strengthen across the board.

The main event today will be the preliminary jobs report for the US. The US ADP data released at 13:15 is expected to come in at 190,000 and show an increase on last month’s 158,000 release. The news comes at a time when the Dollar is trading at a 14-month low and economic data suggests the outlook is looking less robust. A strong number may see the Dollar gain but it’s unlikely to change the overall negative sentiment towards the Greenback.

Donald Trump has further added tension between the US and China over its trade agreements by considering its first major trade action against Beijing. The US officials are in “serious discussions” about launching a probe into a Chinese intellectual property regime that requires foreign companies to transfer technology to local subsidiaries and partners.

Apple’s share price hit a record high, enjoying a 6% boost after the company showed strong third-quarter earnings and allayed fears that delivery of the next iPhone might be delayed past September. The phone’s market share is shrinking in China, but even their Apple’s services are expanding, thanks in part, to upgraded compliance with the rules of the Great Firewall.

European stock markets are set to open higher this morning following their Asian counterparts move higher overnight. The FTSE is set to gain 12 points and the DAX is set to gain 27 points. The Dollar index made a modest recovery overnight, all be it by only 0.1% to 93.091. The Yen gave back some of its gains against the Dollar after briefly trading at the ¥110 level to trade as high as ¥110.80. In commodities, Oil prices continued to move lower as news hit the wires that there could be persistent oversupply. Oil was down 0.8% to $51.35 a barrel.

EUR/USD $1.1827 (+$0.0026)

EUR/USD continued its post-retracement climb after yesterday’s firm Eurozone advance Q2 GDP figure, taking the rate back above the $1.1800 handle in a bid to re-test 2.5-year tops of $1.1845 reached earlier in the week. The pairs renewed gain added further traction in early Europe, as the broad based US dollar recovery faltered ahead of today’s key ADP employment report. Only data of note from Europe will be PPI. Meanwhile, yesterday’s high at $1.1845 may offer some resistance before the January 12th 2015 high at $1.1870. On the downside, Friday’s high at $1.1763 and yesterday’s low at $1.1721 are in focus

GBP/USD $1.3222 (+$0.0023)

GBP/USD broke to the downside overnight, with headwinds due to Brexit/UK political uncertainty, on hold BOE and abating of US dollar weakness driving the move. After reaching fresh lows at $1.3187, the pair found fresh buyers taking the rate back above the $1.3200 handle ahead today’s UK construction PMI and US ADP employment report. From a technical view, yesterday’s high at $1.3244 may offer some resistance before the September 16th high of $1.3248 and September 15th high at $1.3278. On the downside, Thursday’s high at $1.3157 and yesterday’s low at $1.3094 are in focus.

USD/JPY ¥110.77 (+¥0.42)

USD/JPY ticked a little higher overnight, but failed ahead of the ¥111.00 handle given the ongoing Trump drama, Fed caution and renewed focus on the US debt ceiling. That said, the decent rally in US and Asian equity markets dampened the Japanese Yen’s safe-haven appeal and helped the pair to recover from 7-week lows. News flow and data was limited, with monetary base numbers,  a cabinet reshuffle announcement and BOJ speaker. Ahead, the US will see ADP employment change for early insights to payrolls on Friday. In terms of technicals, yesterday’s low at ¥109.91 may offer some support before the June 15th low of ¥109.25 and the June 14th low at ¥108.81. On the upside, today’s high at ¥110.91 and Friday’s high at ¥111.33 are in focus.

GBP/EUR €1.1175 (-€0.0010)

GBP/EUR is slightly lower this morning after a fairly narrow trading range in Asia (€1.1190-1.1163). The Euro has continued its post-retracement climb after yesterday’s firm Eurozone advance Q2 GDP figure, but Sterling has struggled for direction in the middle of the week as traders await today’s UK’s construction PMI and tomorrow’s more relevant BoE meeting. In terms of technicals, we look for support at Monday’s low of €1.1138 and the July 24th low at €1.1128 while on the upside, today’s high at €1.1190 and last Thursday’s high of €1.1246 are in focus.

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