German Economic Slowdown Dominates Headlines

Monday was a slow start to the week ecostats wise with little for traders to work with. It was a national holiday in Australia and China although overnight we had the RBA interest rate decision where no change was expected. This was the case with rates left at 2.5 percent, while in their policy statement the RBA chiefs hinted rates would stay low for some time. This isn’t much change to the recent previous stance so true to form markets had little reaction to rates for sending money to Australia. 

Yesterday’s other data culminated in factory orders for Germany and the Sentix investor confidence survey. The factory orders numbers were way below forecast, coming in at -5.7 percent rather than the expected -2.5 percent. The Sentix survey also missed the mark by 2 points, to its lowest level since April 2013 and its third consecutive drop in the rating.

Surprisingly the euro actually benefited initially against the pound gaining half a cent and then spent the rest of the day trading range bound in a tight 20 point range.  Against the US dollar, the euro managed to gain all day apart from a slight fight back from the dollar on US open, but overall nearly a cent was gained.

The dollar seems to have gained so much recently and managed to break the key psychological resistance level of 1.6 that it has hit a wall and spent Monday paring back its recent gains, which were accelerated by the non farms figures on Friday. The pound gained half a cent but we are still a massive 13 cents off the peak we saw last month as interest rate rises across the pond continue to sure up the greenback.

So today is a different story, having already had the RBA rate decision mentioned earlier, we have a varied range of ecostats from across the world still to come. Swiss retail sales came out above expectation, while inflation figures posted slightly lower. Initially sterling benefited but those gains were quickly reversed so no gains have been made at all. German industrial production this morning, showing further slowdown in the German economy with the figures coming in at -4 percent rather than the -1.5 percent, the largest fall in over 5 years. This could be down to the fact Germany took its summer holidays later this year, meaning factories were widely closed but still not great news and the euro is already a quarter cent down against sterling.

Later on we have UK Halifax house price survey ahead of the release of BoE credit conditions survey and industrial and manufacturing production figures. This afternoon we have a varied range of low key US data including the Redbook index and consumer credit change along with speeches from 3 Fed members including the former chairman Ben Bernanke. Throw into the mix the UK NIESR GDP estimate at 3pm and its likely to be a pretty busy day.

Make sure to stay in touch with the team here at CI to avoid the possible pitfalls the data may throw up.