Shrinking Eurozone Growth, Weakening ZEW
German GDP slows and ZEW declines; Eurozone GDP contracts but ZEW improves; Eurozone industrial production drops; UK CPI higher. The market awaits retails sales, PPI and business inventories. For the latest on the Premium Insights, please see below.
The greenback has been trading within a narrow range in the ongoing session. European equity indices are gaining around 0.5%.
German Q2 GDP came in above expectations but still slowed to 0.3% from 0.5% q/q and to 0.5% from 1.7% y/y. German ZEW economic sentiment declined further to -25.5 in August from July's -19.6 which is the lowest level since December 2011. EURUSD started to move lower but a report that the German constitutional court confirmed that the ESM decision is still planned for September 12th despite the claim that was brought forward at the European court in Luxemburg helped to prevent additional losses.
Despite German growth, Eurozone data mainly disappointed as Q2 quarterly GDP declined 0.2% from a flat reading in Q1 which translates to an annual
decline of 0.4%. Industrial production dropped 0.6% in June after upwardly revised May's 0.9% so the silver lining was the ZEW economic sentiment index that improved slightly in August to -21.2 from July's -22.3. EURUSD trades around 1.2360.
UK CPI unexpectedly rose 2.6% in July from 2.4% while the core figure rose 2.3% from 2.1%. Prices were driven by transportation cost, clothing and footwear. This is the first increase after three months of declines but it is unlikely to change the downtrend in inflation. GBPUSD continues to struggle at the 1.57 handle.
In other news; Swiss PPI fell 0.3% in July, the same pace of a decline seen in June and LCH Clearnet announced that it has raised margin for some Spanish and Italian bonds.
The US session begins at 8:30 am ET with retail sales that are expected to rise 0.3% in July after falling 0.5% in June (core sales are seen at 0.4% from previous -0.4%). July PPI that is also due at 8:30 am is anticipated to slow to 0.5% from 0.7% while core PPI should ease to 2.3% from 2.6% on annual basis.
Business inventories at 10:00 am are seen at 0.2% in June from 0.3% in May.
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