There were no significant UK developments during Thursday with global trends tending to dominate, although there was some reluctance to sell Sterling ahead of next week’s Bank of England policy decision. Lower US yields were also an important element providing net support for the UK currency. The FTSE 100 index was unable to respond to Wall Street gains which hampered the UK currency to some extent, especially with markets fretting over the very weak UK balance of payments position which leaves the currency vulnerable if capital inflows are subdued.
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Euro-Zone industrial sentiment dipped to 3.5 for July from 7.0 previously while the services-sector index retreated to 10.7 from 14.1 in June. Consumer confidence was also confirmed as weaker on the month with the overall business and consumer survey sliding to 99.0 from 103.5. This was below expectations of 102.0 and the weakest reading since March 2021 which maintained a lack of confidence in the Euro-Zone outlook. The Euro was unable to hold post-Fed gains on Thursday and retreated sharply after the European open. There were further important reservations surrounding the Euro-Zone economy, especially with on-going fears surrounding energy prices and gas supplies. ECB council member Visco also stated that the central bank, so far, has not needed to worry about the exchange rate which dampened confidence and the Euro dipped to lows against the dollar. German consumer prices increased 0.9% for July with the year-on-year inflation rate edging lower to 7.5% from 7.6%, but slightly above market expectations of 7.4%.
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10:00 Gross Domestic Product Forecast 0.2% Previous 0.6%
According to the flash data, second-quarter annualised US GDP data was reported at -0.9% compared with expectations of a 0.5% increase and followed a 1.6% contraction for the first quarter. There was a small increase in consumer spending for the quarter despite dip in spending of durable goods. GDP was undermined by another sharp dip in inventories while net exports did secure a net advance for the quarter. Technically, the US economy was, therefore, in recession for the first half of the year which undermined dollar sentiment, although the data will inevitably be revised.
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