European session review: the US dollar strengthened slightly against the pound

The following data was published:

(Time / country / index / period / previous value / forecast)

6:00 Germany consumer confidence index from the GfK August 10.1 9.9 10

Switzerland 6:00 UBS indicator of consumer activity in June 1.35 1.34

6:45 France Consumer Confidence Indicator July 97 96 96

8:00 Changing the Eurozone lending to the private sector, the y / y in June 1.6% 1.7% 1.7%

8:00 Eurozone M3 Money Supply, y / y in June 4.9% 5% 5%

8:30 UK GDP q / q (preliminary data) II quarter 0.4% 0.4% 0.6%

8:30 UK GDP y / y (preliminary data) II q 2% 2.0% 2.2%

10:00 UK retail sales according to the Confederation of British PromyshlennikovIyul April 1 -14

The US dollar consolidated against the euro, as investors await the announcement on Fed's monetary policy and analyze the data for Germany and the euro zone. The survey results, presented by the GfK, showed that German consumer confidence index fell in August as economic expectations and prospects for earnings worsened after Britons voted for withdrawal from the EU. The index of consumer climate fell to 10.0 points in August from 10.1 points in July. However, the figure was above forecasts (9.9 points). The index of economic expectations fell by 8.6 points to 9.4 points.

Meanwhile, the European Central Bank said that the monetary aggregate M3 grew in June at 5 percent year on year, confirming the estimates of experts, and accelerated the pace compared to May (when the M3 aggregate rose by 4.9 percent). Private sector credit growth accelerated to 1.5 percent from 1.3 percent in May. The volume of lending to households increased by 1.7 percent y/y, compared with an increase of 1.6 percent in May.

As for the Fed meeting, analysts almost completely eliminate the possibility of a rate hike in July, but market participants are hoping to get new guideline on the possible terms of policy tightening in the coming months after a series of strong data. Futures on Fed rate point out only a 2% chance of a rate hike in July. Meanwhile, the probability of a rate hike in December up almost 20%. Reuters latest survey found that just over half of the 100 economists expect the Fed to raise rates in Q4 to 0.50% -0.75%. The change is likely to occur in December, according to Fed funds futures.

ONS said that in the 2nd quarter the UK's gross domestic product grew by 0.6 percent compared with an increase of 0.4 percent in the first three months of this year. It was expected that the economy will expand by 0.4 percent. In annual terms, GDP grew by 2.2 percent, recording the strongest growth during the year, and accelerate the pace compared to the first quarter (+2.0 percent). It was predicted that economic growth will stabilize at 2.0 percent. In the 2nd quarter, the services sector recorded an increase of 0.5 percent, while the manufacturing sector - by 2.1 per cent (the best figure since 1999). In contrast, the segment of construction and agriculture reported a decrease of 0.4 percent and 1.0 percent respectively.

The yen has stabilized against the US dollar after the strong fluctuations in the beginning of the session, which were caused by expectations of action by the Government of Japan. Initially, the yen has weakened sharply after WSJ reports that Japan is considering the release of 50-year Japanese government bonds. However, later the Minister of Finance has denied such information. Additional pressure on the yen have reported that Japanese Prime Minister Abe said Wednesday that the stimulus package amounting to 27 trillion yen. Then Abe personally confirmed that the size of the package is now at 28 trillion yen and added that the package will be ready next week.

Most likely, the Central Bank decides to increase ETF purchases at the upcoming meeting. Also not ruled out is a further reduction in interest rates and increasing government bond purchases.

EUR / USD: during the European session, the pair is trading in the range of $ 1.0986- $ 1.1005

GBP / USD: during the European session, the pair fell to $ 1.3071

USD / JPY: during the European session, the pair rose to Y106.52, but then retreated to Y105.50