As a spell of warm weather crouched over northern Europe, the temperature in currency markets also heated up. A barrage of economic data (including German, French and eurozone growth figures) caused the euro to fluctuate throughout the day, albeit in a narrow range.
GBP/EUR swung quickly in both directions throughout the day, ending slightly behind where it started. Sterling struggled more against the US dollar and lost half a cent, while EUR/USD fell by around 0.3%.
The eurozone economy grew by 0.3% in the second quarter of 2024, matching its first quarter output and above predictions of 0.2%, according to preliminary data. France, Italy and Spain all posted positive numbers from April to June, but it was the bloc’s biggest economy that again caused some concern.
German GDP growth unexpectedly fell by 0.1% from its first quarter performance, while annualised growth remained negative for the fourth consecutive quarter. Particularly concerning was the poor performance of the industrial sector, a key cog in the German economy and one that has been hamstrung by the elevated cost of borrowing.
In the afternoon, German inflation provided another minor bombshell. Headline price increases climbed from 2.2% to 2.3% in July, after most economists had predicted they would remain unchanged. Those numbers are subject to later revision, yet it was fair to say Tuesday was not a great day for German markets.
The number of US job openings decreased slightly in June, coming in at just a couple thousand positions lower than the month prior. Markets had been expecting a greater fall, which helped support the US dollar in yesterday’s training.
Oil markets were relatively sangfroid in response to ongoing events in the Middle East and Venezuela. Most market participants did not expect the situation between Irael and Hezbollah to lead to all-out war, while controversy in the Venezuelan elections did not have any noticeable impact on oil prices.
However, overnight events could change that. Hamas political leader Ismail Haniyeh was killed in an Israeli aerial strike, causing concern that the group would ramp up hostilities in response.
A number of high-profile tech stocks are in focus after reporting their earnings today, including giant names like Microsoft. The S&P500 index rose yesterday as investors awaited the results of that and this evening’s Federal Reserve press conference.
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