The picture that was painted of the Euro-zone economy by today’s economic releases was not a pretty one. Italy confirmed expectations for a fourth straight quarter of economic contraction, the country’s GDP declined 0.25% in 2Q according to a preliminary estimate. Italian industrial production also dropped in June, falling 1.4%, which was worse than expected. In Germany, factory orders also fell more than expected, down 1.7% in June.
The mostly worse than expected data suggests that the Euro-zone has yet to begin a rebound from an economic bottom, as both the strongest and weakest of economies disappointed already negative expectations.
Meanwhile, the Swiss economy continued to shine despite the Euro debt crisis that sits right next door and plagues Switzerland’s biggest trade partner. Swiss unemployment remained at 2.7% and deflation was not was bad as expected, with prices dropping 0.7% annually. The Swiss Finance Minister responded to the deflation numbers by saying that the Swiss National Bank will continue to support a EURCHF floor as long as there is no inflation trend.
The British Pound led a rally of major European currencies against the US Dollar following the news of the less than expected Swiss deflation. GBPUSD climbed 50 points beyond the key 1.5600 line and resistance could now come in at 1.5717, by the top of a two-month trading range. EURUSD continued to trade within a week-long 100 point trading range, centered around 1.2400.
No further comments were heard today regarding a possible ECB bond purchase program, but the EU said it stands by the 120% deficit-to-GDP commitment by 2020. However, the spokesman said that the debt target is ambitious.
GBPUSD 15-minute: August 7, 2012
--- Written by Benjamin Spier, DailyFX Research
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