RationalFX : Sterling lower as UK GDP disappoints

RationalFX : The pound has started the day lower after UK GDP has disappointed expectations by only expanding 1.9% month on month in May …

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RationalFX

GBP

The monthly release showed that the domestic economy grew less-than-expected, with Chancellor Sunak commenting that the figures “underline the scale of the challenge we face”. Market expectations were that we would see a 5% rise and this keeps the pressure on the pound after yesterday saw the biggest losses for two weeks against the dollar.

This bucks the recent trend for the pound, it had been appreciating thanks to increased risk appetite and fiscal stimulus. Second only to the Norwegian krone, sterling had been the best performing currency in the month of July. Weaker GDP data and Brexit pressure however have now put this into reverse.

USD

Investor risk appetite decreased late on Monday which ensured the greenback finished the day higher, strengthened by geopolitical tensions and increasing virus numbers. Diplomatic tensions between the US and China seem to renew, and a ‘tit-for-tat’ affair between the two powers should hurt the global economy. The main issues appear to be over access to US financial markets, civil issues in Hong Kong and territorial disputes in the South China Sea. The safe haven dollar is also picking up due to the increase in coronavirus cases, particularly in California where new restrictions have been made after hospital cases soared.

Key announcements

EUR – 10:00am – German ZEW Survey – Economic Sentiment (Jul); expected to decrease to 60 from previous 63.4

USD – 13:30pm – Consumer Price Index ex Food & Energy (MoM) (Jun); expected to rise to 0.1% from previous -0.1%

USD – 13:30pm – Consumer Price Index ex Food & Energy (YoY) (Jun); expected to decrease to 1.1% from previous 1.2%