The tone across markets was decidedly risk-off in the overnight session. This morning European stocks following Asian peers lower as traders grappled with worries around trade, growth and geopolitics. At time of writing, the European bellwethers of the German DAX and French CAC 40 in the red by 0.18% and 0.17% respectively. Already out this morning was German GDP which missed expectations showing the growth of Germany’s seasonally and calendar-adjusted gross domestic product (GDP) decelerated to 0.3% in the first quarter of 2018 compared to a rise of 0.6% recorded in the last three-month period of 2017.
As a result, the euro opens lower this morning. EURGBP is trading back near the .88 mark this morning. After hitting highs of .8830, it now may look to consolidate as the strong resistance line of .8850 that we have highlighted, looks a stretch too far for now. Similarly EURUSD is off over 0.4% versus yesterday’s high, so failure to break the 1.20 mark may see EURUSD hold for now, seeking further direction.
Data wise we’ve a couple of tier 1 releases. As mentioned, we had German GDP already this morning. Then later this morning we have more German data in the form of the ZEW Expectations Survey. At the same time we have the Eurozone equivalents with both the ZEW survey and Q1 GDP data. Annual GDP is expected to show continued growth of 2.5%.
Before all that, we have a triple whammy of UK employment data. The UK labour market report is expected to show that the number of people seeking jobless benefits increased by 7.8k in the three months to April, compared to a rise of 11.6k booked in the three months to March. The unemployment rate is expected to hold steady at 4.2% during the period. Getting the most focus will be wage inflation in the form of average weekly earnings, including bonuses, in the three months to March are expected to dip to 2.6%, while ex-bonuses, the wages are seen a tad firmer at 2.9% in the reported period. A positive UK’s average earnings report could offer fresh impetus on the GBP bulls, which could send the rates back towards the 1.36 handle. On a disappointing result, the GBPUSD pair could target the four-month low of 1.3458 which also coincides with a significant technical support line of 1.3460/70.