Disappointing eurozone industrial data edges ECB bond buying nearer, as all eyes today fixed on BoE Inflation Report

Tom Tong08/Aug/2012Currency Updates

GBP

Thanks to better-than-expected UK data, the pound was able to score gains against the dollar and the euro.

The data released included the manufacturing production report which showed a 2.9% decline for June (expected to be a 4% decline), and industrial production data exceeded expectations with only a 2.5% drop against predictions of a 3.3% decline. The National Institute of Economic and Social Research also put its GDP estimates at 0.2% in July, compared to -0.7% in June. Today, the BoE inflation report at 9:30 am GMT is scheduled for release.

EUR

The euro held steady against the dollar yesterday, supported by persistent hopes for further action by the European Central Bank to lower the borrowing costs of Spain and Italy. The yen inched higher, after having sagged the previous day as investors continued to favour riskier assets on hopes for ECB action to contain the eurozone’s debt crisis. The euro held steady from late U.S. trade on Tuesday, not too far from a one-month high hit on Monday.

The German Factory orders report yesterday failed to meet forecast. It came in significantly worse than expected as it showed a 1.7% decline. The market’s prediction was a decrease of 0.9%.

We’ll probably see more directionless price action from EUR/USD today as no major reports are scheduled to come out. However, German industrial production numbers are coming out and there is a German 10-y Bond Auction.

Meanwhile, German industrial orders fell more than expected in June, raising investors’ expectations for further easing policies from the ECB.

USD

The selection of low and medium tier data for the dollar yesterday delivered an indecisive message resulting in the dollar climbing against most pairs but falling against the Swiss Franc and its neighbour in Canada.

Today there is a large number of data-sets being released from the US, including non-farm production and mortgage applications. It’s all lower tier data on the other hand, but there is potentially a clearer path for the greenback today.

Eric Rosengren, the president of the Federal Reserve Bank of Boston, said on Tuesday that he did not expect the U.S. economy to improve in the second half of the year and reiterated his call for the Federal Reserve, the U.S. central bank, to expand monetary policy and called for more quantitative easing.

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Written by Tom Tong

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