The Pound made gains against the Dollar and the Euro yesterday boosted by data showing Britain’s economy grew almost twice as fast as expected in Q2. Data showed gross domestic product jumped 1.1% on the quarter, the strongest growth in four years and almost twice as fast as forecasts for 0.6%.
In other news last week, the BOE voted 7-1 to maintain their current level of rates, with Andrew Sentance again being the sole dissenter from the decision to leave rates on hold, favouring instead an increase in official rates to dampen inflation risks.
The Dollar declined against the Pound and the Euro yesterday as a bigger-than forecast increase in new home sales of 330K encouraged demand for riskier assets. Given the increasing focus on the possibility of a double dip recession in the US, markets will be keeping a very close eye on this week’s data releases, which include the Fed’s Beige Book on Wednesday. The report is likely to point to the many obstacles the economy face as indicators suggest that the pace of recovery is slowing. Also in the spotlight will be Friday’s release of the first estimate of Q2 GDP, which is expected to show growth of 2.5%; a modest slowing from 2.7%.
The Euro made gains against the Dollar while declining against the Pound as investors risk appetite increased due to bolstered Asian equities. The release of the stress tests on Friday conducted on 91 European banks by the Committee of European Banking Supervisors also has benefited the Euro.
The committee announced that 7 banks had failed the tests with a combined shortfall of 3.5 billion EUR in funding required. Investors were quick to question how stringent the tests were given they ignored the majority of the banks holdings of sovereign debt. European banks had already raised 220 billion EUR over the last 18 months and analysts had been expecting the tests to reveal a funding shortfall 10 to 20 times the 3.5 billion EUR.
Data released 23.07.10
UK 11.00 CBI Distributive Trades (July)
US 14.00 Case Shiller House Prices (May)
US 15.00 Consumer Confidence (July)
