Daily Forex Fundamental Overview

Fundamental Analysis

EUR

"The ECB will preserve its accommodative stance until inflation returns to our aim".

- Peter Praet, ECB

Producer prices in the Euro zone dropped at a faster than expected pace in August, after rising for three consecutive months, official figures revealed on Tuesday. According to the European Union's statistics agency Eurostat, the Producer Price Index for the region fell 0.2% on a monthly basis in August, compared to the preceding month's upwardly revised 0.3% gain, while market analysts expected producer prices to increase 0.1% in the reported month. On an annual basis, the PPI declined 2.1% in the same month, slightly up from the upwardly revised fall of 2.6% and in line with analysts' expectations. The August disappointing data confirmed that inflation pressures in the Euro zone remain weak. The drop was mainly driven by low energy prices, which fell 0.8% month-over-month in August. However, excluding energy prices, the PPI remained stable in the eight month of the year. Economists widely expect consumer prices to rise sharply in the final months of 2016 and in the early part of 2017.

After the release, the Euro was seen trading at 0.8746 against the British Pound, 1.0932 against the Swiss Franc, 1.1172 against the US Dollar and 114.31 against the Japanese Yen.

GBP

"The improved score is really good news but gives reason for cautious optimism however, with the mooted triggering of the formal EU exit process in the first quarter of 2017 likely to be a catalyst for further, potentially deeper, uncertainty in the market.".

- Will Waller, Arcadis

Construction activity in the United Kingdom unexpectedly accelerated last month, according to a private survey published on Tuesday. According to Markit/CIPS, the Construction Purchasing Managers' Index for Britain advanced to 52.3 in September, entering the expansion territory. Back in July, the Construction PMI came in at 49.2 and analysts expected it to fall to 49.0 during September. Britain's construction activity unexpectedly contracted in June, declining to 46.0, its lowest level since June 2009, from May's 51.2 points amid the country's decision to leave the European Union. The Construction PMI data together with Monday's promising Manufacturing PMI showed signs of stabilization in the UK economy after the Brexit vote. New orders rebounded in September, after dropping for four straight months, while commercial construction activity fell for the fourth consecutive month, the longest negative stretch since 2013 although at a slower pace than previous months.

The British Pound was little changed on Tuesday despite the positive data. After the release it was trading at 0.8742 against the Euro, 1.2507 against the Swiss Franc, 1.2783 against the US Dollar and 130.82 against the Japanese.

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