All eyes on USA’s GDP

Of late, UK economic data has been extremely positive. However, since yesterday this trend has been broken. Overnight GfK Consumer Confidence fell by more than expected to -22 (consensus -20, previous -19). This follows yesterday's news that house prices fell by more than expected in July, coming in at -0.5% m/m (consensus -0.3%, previous 0%). It appears that concerns about the medium-term impact of fiscal austerity measures on personal finances is outweighing any potential optimism about the recent recovery's momentum, thus keeping demand low. In other data, both mortgage approvals and mortgage lending in June fell more than expected and M4 money supply was unchanged for June. Despite this negative development, sterling continued its recent surge against the US Dollar and managed to close at levels not seen since February of this year. Significantly, sterling is well supported ahead of a key technical level, the 200 day moving average of 1.5543. The euro has continued to push higher against the US dollar as optimism continues to spread throughout Europe following the release of numerous corporate earnings yesterday, all surpassing market expectation. Additionally, the narrowing of Euro zone sovereign debt spreads over recent days has boosted the single currency. This positive sentiment was further helped by continued improvement in Germany's unemployment data. For 13 months, the German unemployment rate has dropped consistently which has taken the level of unemployment back to 7.6%, its lowest level since Nov 2008. Yesterday we also saw German CPI which showed inflation coming out slightly higher than expected with inflation rising to 1.2% Y/Y in July from 0.9% in June. On Thursday morning the Reserve Bank of New Zealand raised its policy rate 25 bps to 3.00% as widely expected. The central bank however was far more dovish in the accompanying statement than predicted stating future growth prospects had deteriorated considerably. The US dollar has been on the slide for several weeks now and this negativity in the Greenback could continue further with the release of Q2’s QoQ GDP figure (consensus 2.5%, previous 2.7%) at 13:30 BST. Recent data from the US has been poor with manufacturing and durable goods numbers disappointing the markets. This afternoons GDP figure will be key for the short to medium term trading levels of the dollar and views of it being a safe-haven could begin to fade.