Eurozone GDP Due
BoJ minutes, New Zealand retail sales, and Australian business confidence data were released overnight but all failed to generate a significant market reaction. A deluge of economic data due later today could inject more life into FX markets however. German and Eurozone GDP readings for Q2 threaten to disappoint, and our European economics team finds itself on the soft side of consensus. ZEW surveys due from Germany and the wider Eurozone have also proved to be significant market movers in past and our economists are once again looking for a weaker print today. All this is very much in keeping with our year-end EURUSD forecast of 1.15, although we would be cautious about positioning for further euro weakness in the very near-term, given Fed Chair Bernanke’s scheduled appearance at Jackson Hole is only just over two weeks away. Then on Sept. 6, further details on the ECB’s new framework for open market operations is likely to be unveiled − even if actual bond purchases themselves are very unlikely to begin so soon. In the UK another weak CPI report today would be seen as opening the door to yet another round of QE once the current program runs its course, and this could trigger some sterling weakness however brief. In the US, the selection of Paul Ryan as the Republican Vice-Presidential candidate by Mitt Romney has stirred up the election race. Ryan, a fiscal conservative, is known for his proposals to drastically cut government spending and his support for revisions to the Federal Reserve Act so that the Fed’s mandate is narrowed to price stability only. The elections are still three months away however, and retail sales due later today is a far more immediate concern – our US economists look for a modest rebound, but still shy of what the consensus expects.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank