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Forex News: Strong UK Economic News Boosts GBP/USD Currency Pair

Aug 15 • Market Analysis • 1437 Views • Comments Off on Forex News: Strong UK Economic News Boosts GBP/USD Currency Pair

Strong UK forex news releases have boosted the GBP/USD currency pair, causing it to appreciate by 0.18% higher than its opening level. The GBP/USD reached 1.5672 during the US morning trading session before easing 0.05% to reach its consolidation level of 1.5674. Meanwhile, the EUR/GBP fell slightly by 0.04% to reach 0.7860 during intra-day trading.

Forex news from the UK’s Office for National Statistics showed that inflation grew to 2.6% in July on a year-by-year basis from 2.4% in the past month, higher than expectations of 2.3 percent. The increase was attributed to a 22% increase in airfares as well as lower than anticipated drops in the prices of footwear and clothing. On a month-over-month basis, UK inflation grew by 0.1% in July after decreasing 0.4% in June. Meanwhile, core inflation, which smoothes out the rise in prices by removing the volatile food and energy categories, grew 2.3% year-by-year in July from 2.1% the past month.

UK forex news also showed that the Retail Price Index year-by-year reached 3.2% in July from 2.8% in June, which was higher than the 2.8% increase forecasted by analysts. On a month-to-month basis, the Index rose 0.1% in July, which followed a 0.2% decline in June. Analysts had expected that the monthly Index would increase by 0.2 percent. Meanwhile, the UK DCLG Housing Price Index grew just 2.3% in June from a similar increase in May, and lower than analysts’ expectations of a 2.7% increase.

Currency trading markets had become jittery following news that the Euro Zone GDP had contracted by 0.2% in the second quarter of 2012, which was in line with analysts’ expectations, and which raised the rate of contraction year-by-year to 0.4 percent.  However, the bad forex news was ameliorated slightly by better-than-expected economic news coming from Germany and France, two of the currency region’s strongest economies. The German GDP grew by 0.3% in the second quarter to June, which defied expectations of 0.2% growth. Meanwhile, although the French economy recorded zero GDP growth, it was still better than expectations that the economy would contract in the second quarter.

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However, there were danger signs on the horizon for the German economy as growth was already being affected by the Euro Zone sovereign debt crisis, with GDP growth in the second quarter slower than anticipated. Meanwhile, the German economic sentiment index generated by the ZEW Center for Economic Research fell to negative 25.5 in August, from the July reading of negative 16.9. Analysts had anticipated that the index would be negative 19.3.

The US dollar also continued to strengthen on the back of newly released positive forex news. According to the US Commerce Department, retail sales grew by 0.8% in July, which was substantially higher than the 0.3% expected, from a 0.7% decline in June. Meanwhile, core retail sales, which do not include car sales in their computation, rose by 0.8% in the same month compared with a 0.8% fall in the previous month and substantially higher than the 0.2% increase expected. Meanwhile, the Bureau of Labor Statistics reported that the producer price index rose to 0.3% vs. the anticipated 0.2% rise.

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