It was a relatively quiet day yesterday, as the markets digested Wednesday evening’s FOMC statement. The fallout from yesterday’s Federal Reserve statement continued to reverberate through global markets, with the Greenback extending its losses into the European session. The bearish Dollar move comes after sentiment that the central bank will take a cautious approach to raising interest rates. Also, the US weekly Jobless Claims posted a worse than expected figure at 266k, its highest reading this month.
The Pound continued to be sold heavily against the Euro yesterday, breaking another key psychological EUR/GBP level. The Bank of England have limited room for maneuver before switching to negative interest rates. It is likely that the BoE will wait for further information on the implication of Brexit for the UK economy. However, markets are forecasting a rate cut at next month’s pivotal meeting.
The first readings of Q2 GDP from the US and Eurozone will be posted. Firstly, the single currency union is released early this morning. Markets will look to see if the figure drops to 0.3% from 0.6%, showing signs that economic conditions are declining. Simultaneously, the y/y Inflation figure will be released, where markets will be looking to see if there are any signs of further deflationary pressures. In contrast, the US are expecting their Q2 GDP first reading to increase to 2.6%. Although economic data has not given the Fed reason to raise rates just yet, the reading shows that the economy is improving.