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FOREX: British Pound May Fall as GDP Data Weighs on Rate Hike Bets

By , Currency Strategist
26 July 2011 05:25 GMT

Talking Points

  • British Pound May Fall as UK GDP Data Weighs on Rate Hike Bets
  • US Dollar Sold as Obama, Boehner Speeches Fail to Instill Confidence
  • Kiwi Stumbles on Trade Data, Promptly Recovers with Risk Appetite

UK Gross Domestic Product figures headline the economic calendar, with expectations calling for the annual growth rate to slow to a paltry 0.8 percent in the second quarter, the weakest since the UK emerged from the Great Recession a year ago. The result is likely to weigh further on Bank of England interest rate hike expectations and by extension, the British Pound. A Credit Suisse gauge of investors’ priced-in BOE monetary policy outlook dropped to the lowest in 9 months ahead of the release, suggesting the central bank will not raise rates at least until the second half of 2012.

The US Dollar came under broad-based selling pressure after a pair of back-to-back speeches from US President Barack Obama and House of Representatives Speaker John Boehner failed to offer much more than a rehash of familiar arguments surrounding the lingering impasse over raising the US legal debt limit ahead of a deadline on August 2nd and introducing deficit-reduction measures to pacify global ratings agencies that have put the world’s top economy on negative watch for a possible downgrade. The greenback slid as much as 0.5 percent against its leading counterparts.

The New Zealand Dollar started the session on the defensive – pressured lower by a disappointing set of Trade Balance figures – but quickly recovered as a rally across Asian stock exchanges boosted the sentiment-linked currency. The trade surplus narrowed to NZ$230million in June – the lowest in four months – as export growth slowed. Overseas sales added just 4.7 percent from a year before, the softest reading since January. The MSCI Asia Pacific regional benchmark index rose 1.1 percent, opting to focus on profit forecast upgrades from the likes of Canon Inc and Baidu Inc.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

Trade Balance (NZ$) (JUN)

230M

400M

551M (R-)

22:45

NZD

Trade Balance YTD (NZ$) (JUN)

1021M

1289M

1012M (R-)

22:45

NZD

Exports (NZ$) (JUN)

3.97B

4.30B

4.62B (R-)

22:45

NZD

Imports (NZ$) (JUN)

3.74B

3.80B

4.07B (R+)

23:50

JPY

Corporate Service Price (YoY) (JUN)

-0.7%

-0.9%

-0.9%

0:00

AUD

Conference Board Leading Index (MAY)

-0.1%

-

0.2% (R+)

1:00

USD

Pres. Obama Speaks on Debt Negotiations

-

-

-

Euro Session: What to Expect

GMT

CCY

EXP

PREV

IMPACT

6:00

EUR

German GfK Consumer Confidence Survey (AUG)

5.6

5.7

Medium

6:00

CHF

UBS Consumption Indicator (JUN)

-

1.91

Medium

6:45

EUR

French Consumer Confidence Indicator (JUL)

82

83

Low

8:30

GBP

Gross Domestic Product (QoQ) (Q2 A)

0.2%

0.5%

Medium

8:30

GBP

Gross Domestic Product (YoY) (Q2 A)

0.8%

1.6%

High

8:30

GBP

Index of Services (3Mo3M) (MAY)

0.9%

0.9%

Low

8:30

GBP

Index of Services (MoM) (MAY)

0.8%

-1.2%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4329

1.4557

GBPUSD

1.6244

1.6458

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26 July 2011 05:25 GMT