Talking Points:
British Pound May Turn Higher on Profit-Taking After 2Q UK GDP Data
US Dollar Could Rise on Firming Fed Outlook if PPI Figures Outperform
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A revised set of second-quarter UK GDP figures amounts to the only bit of noteworthy event risk on tap in European trading hours. Expectations suggest the initial estimate showing output grew 0.8 percent in the three months through June will be confirmed. UK economic news-flow has stabilized relative to consensus forecasts over recent weeks according to data from Citigroup. That points to a kind of balance between expected and realized data outcomes, hinting a print in line with analysts’ bets is probable.
Such a result may open the door for a corrective rebound in the British Pound. The currency stalled yesterday after a dramatic selloff in the wake of the release of the BOE Quarterly Inflation Report (QIR). The quiet passing of the last bit of relevant event risk for the week and the extent recent selling – Sterling had fallen for five consecutive weeks heading into the QIR – may open the door for a bounce driven by profit-taking. Technical positioning seems to reinforce the probability of an on-coming advance.
Later in the day, the spotlight shifts to the US data docket. July’s PPI and Industrial Production figures as well as Augusts’ preliminary University of Michigan Consumer Confidence reading are on tap. The latter two reports are expected to show improvements with output rising 0.3 percent and the UofM gauge erasing July’s downswing. The pace of wholesale inflation is expected to ease for a third consecutive month, sliding to 1.7 percent year-on-year from 1.9 percent recorded in the prior month.
US price-growth data has increasingly outperformed compared analysts’ bets since the beginning of the year however, opening the door for an upside surprise on the PPI front. Such an outcome coupled with supportive news-flow elsewhere on the US calendar may fuel speculation that the Federal Reserve will raise interest rates relatively soon after the end of QE3 in October, sending the US Dollar higher. The chart setup warns of ebbing upside momentum and hints a pullback may be ahead after the greenback hit a five-month high however.
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Asia Session
GMT
CCY
EVENT
ACT
EXP
PREV
No Data
European Session
GMT
CCY
EVENT
EXP
PREV
IMPACT
8:30
GBP
Gross Domestic Product (QoQ) (2Q P)
0.8%
0.8%
Medium
8:30
GBP
Gross Domestic Product (YoY) (2Q P)
3.1%
3.1%
Medium
8:30
GBP
Index of Services (MoM) (JUN)
0.3%
0.3%
Low
8:30
GBP
Index of Services (3M/3M) (JUN)
1.0%
1.0%
Low
Critical Levels
CCY
Supp 3
Supp 2
Supp 1
Pivot Point
Res 1
Res 2
Res 3
EURUSD
1.3256
1.3315
1.3340
1.3374
1.3399
1.3433
1.3492
GBPUSD
1.6602
1.6641
1.6664
1.6680
1.6703
1.6719
1.6758
— Written by Ilya Spivak, Currency Strategist for DailyFX.com
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Source: Daily fx