The Eurozone GDP forecast for full-year 2020 was downwardly revised from -8.7% to -8%, and it was downgraded from 5.2% to 5% for 2021. Inflation forecasts were raised slightly to 0.3% this year and 1.0% in 2021. Growth could reach 1.93% in 2022.
From 1.1918 the price action quickly retraced to the balance line at 1.1810 (-108 points). The US dollar drew support from a pullback in equities and a slide in cable due to hard Brexit fears.
The pound sterling took a hit across the board. It was heavily impacted by warnings from Brussels and a rally in EURGBP against the backdrop of Christine Lagarde's speech. The British currency plunged 2% to 1.2729 against the dollar, and 1.64%, to 0.9225 against the euro.
The European Commission said that if Britain passes the proposed domestic legislation overriding parts of the Withdrawal Agreement it would constitute a serious breach of the Brexit treaty and international law.
Today’s macro agenda (GMT 3)
11:30 UK: inflationary expectations (Q3); Eurogroup meeting also to be held on Friday
15:30 Canada: Q2 capacity utilization; CPI due out stateside (August)
18:00 UK: NIESR monthly GDP tracker (August)
20:00 US: Baker Hughes weekly oil rig count
21:00 US: budget statement (August)
Major currencies are on an upward trajectory in Asian trading. A long upper shadow has formed on the daily candle. It will be quite challenging for buyers to muster a rally on the last trading day of the week.
The 45th degree of the Gann angle passes through 1.1864 and acts as a resistance level. It also roughly coincides with 50% of the decline from 1.1918 to 1.1810. In line with our forecast, we expect the pair to recover to the above-mentioned level. We do not expect to see a rally or even an end to the decline, although such a scenario looks quite plausible in light of positive equity market sentiment and a weakening of the dollar against major currencies.
Buyers are worried about the EURGBP cross pair. There is a risk that a correction could set in ahead of the weekend and then the euro bulls with the dollar would not be able to withstand aggressive euro selling.