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Europe set to rebound, German GDP and CPI in focus

Overnight China released the latest retail sales report, and there was an increase of 8.8%, and the consensus estimate was 9.1%.

The June report saw an increase of 9%. Beijing also revealed the latest industrial output figures, and the update showed a 6% rise, and traders were anticipating 6.3%. In June, output rose by 6%. The announcements show a cooling of economic activity in tandem with the protectionist policies from the US.   

Equities finished lower yesterday as investors were worried about crisis in Turkey. The slump in the Turkish lira has rocked market confidence as there is a growing fear that banks in Turkey might struggle to repay their foreign loans. The memories of the eurozone debt crisis are still fresh in traders’ minds, and investors are fearful the situation in Turkey could trigger another debt crisis. The health of banks is something that investors take very seriously, and seeing as the word ‘contagion’ is be thrown about, traders are likely to remain cautious.

Gold dropped to a level not seen since early 2017. The metal has been losing ground since April, and yesterday it crashed through the $1,200 mark. The US dollar has been a safe-haven play recently, and the inverse relationship between the commodity and the greenback has been high lately.

At 7am (UK time) Germany will release the second-quarter GDP report, and on a quarterly basis, dealers are expecting a reading of 0.4%. The German CPI report will be announced at the same time, and on an annual basis, economists are anticipating a reading of 2%. The figures from the powerhouse of Europe will be closely watched.

The German growth update could set the tone for the eurozone growth figures which will be released at 10am (UK time),and dealers are anticipating 0.3% growth on a quarterly basis, and it is worth remembering the bloc saw 0.3% growth in the first-quarter. These economic announcements could add volatility to the euro. Yesterday, the single currency dropped to its lowest level against the US dollar since July last year. The euro is likely to remain in the firing line, while the Turkish lira remains under pressure.

Sterling has been hit by the firmer US dollar as traders seek out safe haven assets like the greenback. The fear of a ‘no-deal Brexit’ is still doing the rounds too. The latest UK unemployment and earnings figures will be released at 9.30am (UK time). The jobless rate is tipped to hold steady at 4.2%, while average earnings excluding bonuses are anticipated to rise by 2.7%. In recent months, average UK wages have been outstripping the inflation rate, and that trend will need to continue in order for the British consumer to have a real increase in wages.            

EUR/USD – now that it has broken below the 1.1500 region, we could see further losses. Support might be found at 1.1287 or 1.1156. A bounce back might run into resistance at 1.1500 or 1.1663.

GBP/USD – has been in a downtrend since April, and if the bearish move continues it could target 1.2590. Pullbacks might run into resistance in the 1.2957 to 1.3000 region.       

EUR/GBP – has been pushing higher since April and if the bullish run continues it could target 0.9050. A move lower might find support at 0.8900 or 0.8844. 

USD/JPY – the upward trend that began in March is still intact, and if the positive move continues it might target 112.15. Support might be found at 109.96 – the 200-day moving average.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. 

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