German Wholesale Prices Drop at Record Pace, U.K. House Prices Fall Further

Fundamental Headlines

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• China’s Exports Fall by Most Since 1999 on Recession – Bloomberg

EURUSD – The German wholesale price index fell 3.0% in December, which was followed a 3.3% decline in the previous month, and lowered the annual rate to -3.3% from -0.8%. The data continues to support the European Central Bank’s dovish outlook for inflation, which would allow policymakers to ease policy further as price pressures alleviate. As the ECB continues to carry out its primary mandate to ensure price stability, increasing risks for deflation could force the central bank to lower borrowing costs even further this week in order to meet the 2% target for inflation. Discuss the topic and your trade ideas in the EUR/USD Forum.

GBPUSD – The U.K. visible trade gap unexpectedly widened to a record deficit of GBP 8.33B from a revised reading of GBP 7.631B as exports plunged 5.8% during the month. Meanwhile, imports dropped 1.8% from previous month, which suggests that economic activity is likely to weaken further over the coming months as trade conditions falter. Meanwhile, the RICS housing reports showed that home price in U.K. dropped at a slower pace in December as the index pushed higher to -73% from -76% in November. However, the breakdown of the report showed that the number of home sales fell to 10.1, which is the lowest reading since the series began in 1978. Moreover, the DCLG UK house price index fell another 8.6% in November, followed by a 7.4% decline in the previous month, and conditions are likely to get worse over the near-term as credit conditions remain far from normal. Deteriorating fundamentals paired with mounting growth fears continues to favor a dour outlook for the U.K. economy, and as the Bank of England expects price growth to fall below their 2% target, the central bank is likely to ease policy further over the near-term. Discuss the topic and your trade ideas in the GBP/USD Forum.