GDP surprise for Eurozone

Claire Hogarth15/Aug/2014Currency Updates

Worse than expected news from key reports for the Eurozone, and to a lesser extent the US, created yesterday a moderately volatile trading day in the EUR and USD. It seems like investors are anticipating bad results coming from the Eurozone. The US seems not much affected by the slowdown in Europe, however, in the last couple of days key reports coming from the US were also worse than expected. Today should be very interesting as a lot of news will come out from over the Atlantic and the next couple of days should prove interesting for EUR too.

GBP

No news was released yesterday from the United Kingdom. GBP remained flattish versus USD and EUR. Today, the UK will release GDP results at 09.30 local time, which is the most important report of the day. The consensus is for an increase of 0.8% for the second quarter.

EUR

Dismal news came again from Europe as the Eurozone failed to grow at all in the second quarter of 2014.

Germany’s economy contracted while France’s stagnated in the second quarter, indicating the Eurozone’s yearlong recovery has lost momentum. The Eurozone’s largest economy contracted 0.2% in the three months to June. Economists expected the economy to shrink 0.1% on the quarter and grow 1.4% in annual terms. Earlier, figures from France’s statistics agency showed the Eurozone’s second-largest economy failed to record any growth for the second quarter in a row in the period April through June. Economists expected a 0.1% GDP expansion in the second quarter from the first. Compared with the same period of 2013, gross domestic product was up just 0.1%. Figures published previously showed Italy’s economy also contracted in the second quarter, by 0.2%. The data released on Thursday means that none of the Eurozone’s three largest economies expanded in the three months to June.

The Eurozone also confirmed an annual Consumer Price Index of 0.4% for July, as released earlier in the flash estimate. This remains well below the ECB target of 2%, and is by far the lowest of any major economy.

The EUR remained flattish to slightly positive versus USD and GBP. Today, no news will be released for the Eurozone.

USD

The number of people who applied for unemployment benefits rose 21,000 to 311,000 in the week the ended Aug. 9, hitting the highest level since June. Despite that rise, weekly claims remained near pre-recession levels, signalling a slow pace of layoffs. Economists had expected initial claims for regular state unemployment insurance benefits to rise to 300,000 in the most recent weekly data from an originally reported 289,000 for the prior period. USD declined slightly versus EUR and remained flattish versus GBP.

A lot of reports will be released today across the Atlantic, though none of them are major market movers. First, at 13.30 local time the most important report will be the Producer Price Index. This measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. The forecast is 1.8%. Second, at 14.15 local time, the industrial production and capacity utilisation reports for July will be released. The consensus is 0.3% and 79.2% respectively. At last, the Michigan Consumer Sentiment Index for August will be reported at 14.55 local time. The consensus is 82.2.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.