GBP/EUR 1.1599 (0.8620)
Data was light yesterday as was news flow and with very little driving the markets we experienced consolidation across most major currencies. What little data that was out did little to move markets but there were some signs of improvement from the Eurozone peripheral and some strong lending data from the UK.
The Bank of Spain released their early estimate for Q2 GDP expecting a contraction of .1% versus the .5% contraction experienced in Q1. The pace of contraction is apparently slowing but the region is still contracting and yesterday release is only an early guide and Spain will continue to struggle to find growth into 2014.
Data from the UK indicated that mortgage lending from high street banks rose for the fourth consecutive month as people look to take advantage of the low rates available and the benefits from the UK governments help to buy scheme. The pace of mortgage loan growth has slowed from May but the indications are that the general economic recovery is improving the broad based housing market.
Eurozone PMI data released this morning has shown some encouraging signs for Europe. Both French and German Manufacturing and Services PMI data beat expectations , French data still showed the industry in decline albeit the pace of contraction is slowing, but the real boost for the EUR came from a strong upside beat in German Manufacturing posting 52.5 versus 50.7 and putting distance between the boom/bust level of 50. The Eurozone composite figure for PMI has also beaten that 50 benchmark level.
The European calendar is light for the rest of the day so we’d expect to see some further EUR positivity carrying through the rest of the day. The US has some key data out with New Home Sales data due, recent US data has tended to be weaker than expected and any further weak data will likely undermine tapering expectations and weigh on the USD.
EURGBP continues to coil at the lower end of the range but the failure to break back below .8580 area see’s this pair maintain its recent range between .8580 to .8650. We need to wait for something stronger to drive the pound here and tomorrow GDP figures could be just enough to help push through the .8580 support.
EURUSD continues higher, stronger Eurozone data and weaker than expected data from the US are driving EURUSD towards 1.3300 resistance with good support now just below 1.3100. GBPUSD has fallen short at 1.5400, we may see further consolidation here ahead of tomorrow’s GDP release.