GBP Drops After Disappointing Data and Comments from BoE

Traders have seen choppy trading since London session started with USD little changed against its counterparts. German Consumer Climate improves and UK current account deficit comes wider than expected. US session will bring data from housing and manufacturing sectors and latest news on consumer confidence.

German GFK consumer confidence survey for July improved slightly to 5.7 from 5.6 and marks a first advance after four consecutive months of losses. German June CPI is being released from various regions throughout the day with most parts seeing consumer inflation either 0.1% or slightly higher at 0.2%. Once compiled, the headline figure is due later today.

GBPUSD dropped to 1.5911 on lower rate hike expectation and fear of further QE after UK final Q1 GDP stayed unrevised at 0.5% and year over year figure was revised down from 1.8% to 1.6%. Current Account balance came out at GBP -9.7 bln, much wider than expected GBP -5.0 bln.

Inflation report hearing in front of parliamentary committee explained worries that members of BoE share. Among the most dovish were comments that economy continues to be too weak to withdraw stimulus and expressed concerns that further asset purchases may be warranted. It seems that calls for rate increase that we have seen in the past few months were premature.

New York session starts at 9:00 am ET when S&P CS composite index is due. The price of single family homes is expected to decrease by -3.9% from previous -3.6%. Should it come as expected, it would mark six months of negative results and more importantly 11 months of gradual back to back worsening.

Consumer Confidence for Jun is due at 10:00 am ET and it is expected unchanged at 60.8. At the same time Richmond Manufacturing Index will be released and it is expected to pick up to 2 from previous -6. In light of recent deterioration of manufacturing activity it is hard to image that this index would improve.

As the Greek parliament vote is getting closer, markets are likely to remain nervous. Choppy trading within a range is likely as players will hesitate to open new positions ahead of the decision.

Patrik Urban