Daily Forex Fundamental Overview

Fundamental Analysis

EUR

"Despite the positive signals from the Bank Lending Survey, lending in the Euro area is still picking up only slowly. On the other hand, the banks' government bond portfolios are growing. The ECB's ability to rapidly ramp up investment in the economy by way of lending remains limited. ".

- DZ Bank

The Euro zone money supply and credit to the private sector grew at a faster pace in June than the month before, according to official data released by the European Central Bank (ECB) on Wednesday. The ECB reported that its broad indicator of money supply M3 advanced 5.0% on an annual basis in June. That was in line with analysts' expectations following the previous month's reading of 4.9%. The central bank regards M3 money supply as a barometer for future inflation. The data also revealed that the narrower monetary aggregate M1 grew 8.6% year-over-year in the sixth month of the year, down from the 9.1% growth pace seen in May. Furthermore, the annual growth rate of loans to the private sector climbed 1.5% in June, compared to last month's pace of 1.3%. Loans to households in the Euro zone went up by 1.7% year-over-year, or 0.1% up month-over-month in June, matching analysts' estimates. In the meantime, loans to non-financial corporations in the 19-nation currency bloc increased 1.7% in the reported month, after rising 1.6% in the preceding month. The following data release added evidence that the European Central Bank's credit easing policy, which was launched two years ago, is working. Moreover, the data confirmed the view of a continued improvement in credit conditions, stated in the latest ECB quarterly bank lending survey.

USD

"It suggests that the disappointing performance in business investment activity goes beyond the slackening in capital goods demand in the energy sector, and it underscores the continued sluggishness in this segment of the U.S. economy".

- Millan Mulraine, TD Securities

For the second consecutive month, orders for long lasting factory goods made in the United States fell, fresh figures from the US Census Bureau revealed on Wednesday. Excluding transportation equipment, new orders for durable goods fell 0.5% on a seasonally adjusted basis in June, compared to the previous month's downwardly revised drop of 0.4%, whereas market analysts expected core durable goods orders to advance 0.3% in the reported month. Overall orders for US manufactured durable goods decreased 4.0% in June, following last month's revised fall of 2.3% and falling behind the 1.1% drop forecast. Other data released by the Energy Information Association on Wednesday showed that US crude oil inventories added 1.7 million barrels in the week ended July 22, after the 2.3 million barrel fall registered in the previous seven days, while economic desks penciled in a decrease of 2.1 million barrels in the reported period.

The durable orders report stands in contrast to other recent data suggesting the US manufacturing sector stabilized in June. A Federal Reserve report showed manufacturing output was modestly above year-earlier levels in June.

GBP

"It's always difficult to tell where you're going by looking in the rear-view mirror, and as such today's GDP figures can't be taken as evidence of the current climate."

- Ben Brettell, Hargreaves Lansdown

UK GDP advanced 0.6% on a seasonally adjusted basis in the second quarter of 2016, as reported by the Office for National Statistics on Wednesday, surpassing the 0.5% market forecast and the 0.4% rise seen in the first quarter. Economic output expanded in 2 out of 4 main industrial sectors: services added 0.5%, whereas production gained 2.1%. However, construction and agricultural sectors showed a pronounced downward trend sliding 0.4% and 1% respectively. Year-over-year, British GDP increased by 2.2%, above the expected 2% and compared to the 2% reading in the previous quarter. The Pound weakened upon the news release and traded at just $1.311, while the FTSE 100 Index reached its highest level since July 2015 and traded at 6,770 in the second half of the London session on Wednesday. Despite the positive economic outlook provided by the quarterly GDP data, supported by the BoE and the Treasury promises to take all the needed actions to accommodate the economic growth, experts noted that the published results included only one week after the Brexit vote and were largely driven by booming industrial activity in May/June. The overall market forecast for the third quarter was revised down to 0.4%, reflecting the expectations of weakening economy captured by plummeting retail sales and lackluster PMI figures.

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