UK GDP Weaker Than Expected in Spring, Focus Shifts to German Inflation Data


GBP

GBP/USD is trading higher at 1.3410 (interbank), close to last week’s high of 1.3430, a level not seen since February 2022. GBP/EUR has dipped slightly and is currently trading at 1.1980 (interbank), after peaking at 1.2022 last week.

Sterling continues to perform strongly against its major counterparts as investors expect the Bank of England (BoE) to take a slower and less aggressive approach to interest rate cuts compared to other G7 central banks.

Data released on Monday revealed that Britain’s economy grew at a slower pace in the second quarter than previously estimated. Gross Domestic Product (GDP) expanded by 0.5% between April and June, down from the flash estimate of 0.6%. The year-on-year GDP growth was also revised lower to 0.7%, compared to the initial estimate of 0.9%.

There is limited high-impact economic data expected from the UK this week.

Today’s Events (GMT+1):

07:00 - Business Investment (Q2) – Actual: 1.4% vs Forecast: -0.1%

07:00 - GDP (YoY) – Actual: 0.7% vs Forecast: 0.9%

07:00 - Nationwide HPI (Sep) – Actual: 3.2% vs Forecast: 2.4%

EUR

EUR/USD is currently trading at 1.1195 (interbank), relatively steady ahead of the flash inflation data for September, due to be released shortly.

This data will be closely monitored by European Central Bank (ECB) officials, who are weighing whether to cut rates again in October.

Expectations for another rate cut by the ECB increased after inflationary pressures eased further. Investors now see a 75% chance of a rate cut at the 17th October meeting, up from 25% last week, according to Reuters.

The ECB already reduced the deposit facility rate by 25 basis points to 3.5% during the September meeting.

Today’s session will also feature a speech by ECB President Christine Lagarde, while German inflation figures are due ahead of the broader eurozone data later this week.

Today’s Events (GMT+1):

13:00 - German CPI (Sep) – Forecast: 0.1%

13:00 - German CPI  (Sep) – Forecast: 1.7%

14:00 - ECB President Lagarde Speaks

USD

The Dollar Index, which measures the U.S. dollar against a basket of six major currencies, has dipped slightly to 100.28, following its fourth consecutive weekly decline and ninth in the last 10 weeks.

The U.S. dollar weakened last week after the Federal Reserve’s preferred inflation measure indicated that price pressures are continuing to ease. This follows the start of the Fed's rate-cutting cycle.

Federal Reserve Chair Jerome Powell is due to speak today at the National Association for Business Economics in Nashville, Tennessee, where he is expected to elaborate on the Fed’s decision to lower interest rates by 0.5 percentage points earlier this month.

A survey conducted by the same group, released on Sunday, cited a potential "monetary policy mistake" as the biggest risk to the U.S. economy over the next 12 months.

Later this week, Friday’s nonfarm payrolls report is expected to provide further guidance on the direction of U.S. interest rates, with economists forecasting 144,000 new jobs added in October.

Today’s Events (GMT+1):

13:50 - FOMC Member Bowman Speaks

18:55 - Fed Chair Powell Speaks

CAD 

USD/CAD is currently trading at 1.3523 (interbank), while GBP/CAD has risen to 1.8132, its highest level in seven years.

On Friday, Canada’s GDP for July showed a 0.2% month-on-month increase, surpassing expectations of 0.1% and recovering from the previous month’s flat reading.

Traders are now pricing in a 50% probability of a larger rate cut by the Bank of Canada (BoC) in October.

Oil prices have declined, with Brent crude currently at $71.52 per barrel and West Texas Intermediate (WTI) at $67.99 per barrel, amid ongoing conflicts in the Middle East.

The Canadian economic calendar is light this week, with the Ivey PMI data set to be released on Friday.

No significant events are scheduled for today

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European Inflation, UK, and U.S. Rate Decisions Take Centre Stage