Sluggish second quarter for the Eurozone

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The focus is firmly on the health of the Eurozone economy this morning. We’ve already seen numbers from both Germany and France, with data for the Eurozone has a whole (at 09:00 GMT) likely to show that the economy ground to a halt in the second quarter. The German reading showed a 0.2% decline in the second quarter, with French data flat. We’ve seen four quarters of positive Eurozone GDP up to Q1 of this year, following what was 6 quarters of negative readings. The fear is that the economy is heading for recession once again, not helped by events in Ukraine and the potential for further sanctions to negatively impact in the current quarter. A lot of this is already factored in by the currency and the ECB, given the recent easing and liquidity moves.

Yesterday was all about sterling, with the currency falling on both wage data (negative headline reading) and then the message from the Bank of England Inflation Report, which sounded a more cautious note towards the prospect of a tightening of policy this year. This pushed cable below 1.67 and EURGBP back above 0.80 for the first time since early June. Overnight we’ve also seen a push higher on the kiwi in the wake of better than expected retail sales data, NZD up to 0.8489 in the early part of Asian session. Later today we will get the usual claims data form the US. The dollar itself has been slowly asserting itself this week, more so against the non-commodity currencies, such as the yen, euro and Swissie. This suggests that the underlying momentum remains positive, with the dollar index (DXY) close to a new high for the year (last achieved Wednesday of last week).

Further reading:

Pound Catches a Cold on Sluggish Wage Growth

Forex Analysis: GBP/USD Hits New Low at Major Support Level

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