Global stocks tank after weak China data
The sterling rose then declined against the USD after the Office of National Statistics (ONS) released the inflation data. The numbers showed that consumer prices edged slightly higher in July. The headline CPI rose by an annualized rate of 2.1%, which was higher than the previous 2.0%. On a MoM basis, there was no change in consumer prices. The core CPI, which removes the volatile food and energy products rose by an annualized rate of 1.9%, higher than the previous 1.8%. On a MoM basis, the core CPI rose by 0.1%. The PPI input, which measures the change in the price of goods and raw materials bought by manufacturers rose by 1.3% while the PPI output rose by 1.8%. Meanwhile, the UK yield curve inverted for the first time since the financial crisis as worries over Brexit grow.
The euro moved slightly lower after weak data from Europe. In Germany, the second-quarter GDP data showed that the economy contracted by -0.1%. This was in line with what the market was expecting. On year-to-June, the economy expanded by just 0.4%, which is its slowest growth rate in 6 years. Ongoing volatility on Brexit, trade war, and the weakening of the automobile sector are the likely causes. Earlier on, Volkswagen added to worries by announcing that car shipments declined by 3.3% YoY in July. Meanwhile, in the European Union, industrial production declined by 2.6% on a YoY basis and 1.6% on a MoM basis. The economy expanded by just 1.1%.
Global stocks declined today in reaction to weaker economic data from China. In the US futures showed that the Dow and S&P were expected to decline by 271 and 30 points respectively. In Europe, the DAX, FTSE, and CAC declined by 236, 85, and 80 points respectively. Earlier on, data showed that industrial production increased by 4.8% in July after rising by 6.3% in June. Industrial production increased by 5.8% from the previous 6.0% while fixed asset investment increased by 5.7% from the previous 5.8%. Retail sales declined to 7.6% from the previous 9.8%. These data show how China has been hammered by the trade war and the ongoing weakness in the global economy. These declines came a day after the US reduced the volume of goods that will be tariffed in September.
The EUR/USD pair moved slightly lower after the weak economic data from the European Union. As of writing, the pair is trading at 1.1168, which is 6 pips above the important support level of 1.1162. On the hourly chart, the pair is slightly below the 10-day and 20-day moving averages. The accumulation/distribution indicator has been moving downwards. The point to watch will be whether the pair will cross the support of 1.11632. If it does, there is a likelihood that the price will continue moving lower.
The GBP/USD pair pared back the previous gains in the Afternoon session. The pair is trading at 1.2065, which is a few pips higher than the previous low of 1.2013. On the hourly chart, the pair is trading along the 20-day and 50-day moving averages. The price is also below the 23.6% Fibonacci Retracement level. There is a likelihood that the pair will continue moving lower. However, traders should continue focusing on Brexit developments.
After making strong gains yesterday, the USD/JPY Pair declined sharply today as investors continued to worry about trade and the global economic climate. The Japanese yen is often viewed as a safe haven currency when global tensions rise. The pair is now trading at 105.80, which is the lowest level since yesterday. On the hourly chart, the pair is along the middle line of the Bollinger Bands while the RSI has slumped to the current level of 47. The pair will likely continue moving lower to test yesterday’s low of 105.00.