July 8: European session
GBP/USD slid below $1.7100 on weaker-than-expected data from the UK: manufacturing and industrial production unexpectedly contracted by 1.3% and 0.7% respectively. Such poor data will make the market expect a later rate hike from the Bank of England. EUR/GBP recovered to the 0.7960 area from yesterday’s low at 0.7914.
EUR/USD is testing levels below $1.3600. German trade surplus exceeded forecasts, but so did France’s trade deficit. The Bank of Spain head and the ECB Governing Council member Luis María Linde said on Tuesday that euro zone inflation would remain far from the central bank’s 2% target for some more time and that a possibility of deflation existed. Therefore, rates would be kept low for an extended period of time and the ECB would continue developing the asset backed security purchase program. The ECB executive board member Christian Noyer also spoke today about the threat of low inflation.