GBP/EUR: UK trade deficit at nine-month low | City & Business | Finance


Industrial production rose 0.5 per cent on the month in June, which is only the fifth time output has expanded in the last twelve months.

Manufacturing stagnated month-on-month, better than May’s -0.1 per cent decline but worse than the 0.5 per cent growth expected by economists.

Year-on-year manufacturing may be at a three-month high of 0.6 per cent, but compared to the average 2 per cent growth seen between November 2016 and March 2017, this is little comfort for nervous traders.

Construction output on the year only managed to improve from -0.5 per cent to 0.9 per cent.

Estimates had been for a 1.9 per cent expansion in activity.

Additionally the latest trade balance figures for June showed that the UK’s trade deficit was the largest in nine months after the shortfall widened to -£4.56 billion instead of to -£3.6 billion.

However, markets are largely relieved that UK industry at least recorded some level of growth in the final month of the second quarter, which is allowing the GBP/EUR exchange rate to rise.

A GDP estimate for July from the National Institute of Economic and Social Research (NIESR) could help the pound to establish a firmer footing this afternoon if it beats the expected 0.3 per cent economists are predicting.

A lack of Eurozone data is leaving the euro vulnerable to overseas developments and market sentiment today.

Markets are continuing to buy into the US dollar as a safe-haven after North Korea described how it may launch four missiles into the waters 30km off the coast of the US island territory of Guam, Micronesia.

What little Eurozone releases have been published have proven mixed; French industrial production declined -1.1 per cent on the month in June – nearly threefold the rate of contraction forecast – while the Italian trade surplus improved from €4.34 billion to €4.5 billion.

Findings from a Reuters poll of economists, that it is more likely the European Central Bank (ECB) will announce changes to its vast quantitative easing programme next month, rather than wait until October, have failed to push the euro higher.

There is no Eurozone data left for release today, which is likely to leave EUR vulnerable to market sentiment as the situation between the US and North Korea continues to develop.

US data may also have a moderate impact upon the common currency.

Although the initial jobless claims figures for the week ending August 5th and continuing claims figures for the week ending July 29th are unlikely to have much of an impact on the US economic outlook unless the figures massively deviate from the average printing over the current weeks, a press briefing from the Federal Reserve’s William Dudley could provide clues as to the outlook on monetary policy.

Should Dudley make some upbeat remarks to the press, odds of an interest rate hike are likely to be repriced higher, boosting the US dollar further on top of the safe haven demand it is currently enjoying.

Dovishness here, however, could see those odds move lower, which would allow the euro to find some support.

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