The first official insight into the UK’s economic growth, in the second quarter of 2017, showed that Britain’s economy expanded by 0.3%, in line with market expectations. However, taking into consideration the first quarter’s GDP figures, experts note that the British economy experienced a significant slowdown in the first half of the year, which was the worst since 2012. Construction and manufacturing declined, dragging down growth, while services was the only sector to record a positive reading.

In the US, investors and traders are expecting the Fed’s statement due to be published after the end of the Federal Open Market Committee (FOMC) meeting. The Fed is expected to keep its interest rates stable, but experts will be looking for clues regarding the start of the balance sheet’s normalisation process.

Pound Sterling – UK Markets

Today, Sterling weakened against the US Dollar with the exchange rate set at $1.30. On the contrary, the Pound strengthened against the Euro with the exchange rate hovering around the €1.12 mark.

The Office for National Statistics (ONS) published the preliminary UK GDP figures for the second quarter of the year. The report indicated that the British economy experienced a notable slowdown in the first half of 2017. The British GDP grew by 0.3%, between April and June, in line with forecasts. It should be noted that the GDP had expanded by 0.2% in the first quarter of the year. On a year to year basis, the GDP grew by 1.7% in the second quarter, lower than the 2% recorded in the first three months of the year.

The ONS report showed that industrial output shrank by 0.4%, with construction performing even worse, contracting by 0.9%. The service sector was the only one on the positive side, since it grew by 0.5%. In terms of economic growth, the first half of this year is the worst first half recorded since 2012. However, this is the 18th consecutive quarter of economic growth recorded in the UK.

US Dollar – US Markets

The US Dollar gained 0.2% in value against the Euro, with the exchange rate set at €0.86. The FOMC meeting will be concluded later in the evening, with market analysts expecting to read the post-meeting statement.

The Fed is expected to keep the interest rates stable, but analysts will be waiting to read its statement and to search for clues regarding the normalisation of its balance sheet. The US central bank has vowed to reduce its $4.5tn balance sheet, but there isn’t yet a specific time frame when this is going to occur. A report by Nomura analysts says that some of the FOMC members will argue that the process needs to start immediately, but adds that there is little chance the Fed deciding that today.

Consumer confidence in the US jumped to a near 16-year high in July, according to a Conference Board survey. Data published by the New York-based non-profit organisation showed that US consumers foresee that the current economic expansion will continue well into the second half of 2017.

Euro – European Markets

The Euro slumped against the US Dollar with the exchange rate set at $1.16. Positive news continues to come out of the Eurozone, with Italy and Spain being the protagonists today.

A survey published by the National Institute for Statistics (ISTAT) service in July showed that business and consumer confidence in Italy surpassed expectations in a challenging time for the Italian economy. In Spain, June’s retail sales increased by 2.5%, on a yearly basis, while economists were anticipating a 1.2% reading. These results seem to be in line with the International Monetary Fund’s (IMF) report, which says that Eurozone recovery is broad and strengthening.

However, the IMF stresses that the improvement is “clouded by significant downside risks.” IMF analysts note that Eurozone governments are required to take decisive actions, including the adoption of tough reforms, and achieve deeper integration of the currency bloc. The IMF also urges governments to increase public spending on growth-friendly projects.

Other Currencies – Highlights

The Pound rallied against the Australian Dollar, trading at 1.65 AUD. The Aussie dropped when the Governor of the Reserve Bank of Australia (RBA), Phillip Lowe, said he would prefer if the Aussie was a bit lower. Lowe noted that that the Australian inflation data, published by the Australian Bureau of Statistics (ABS) earlier, is in line with RBA’s expectations. Inflation in the second quarter of the year came at 1.9%, on a yearly basis, lower than the anticipated 2.2%. The inflation reading is below the RBA’s target.

Sterling dropped against the New Zealand Dollar, trading at 1.75 NZD. Data released showed that New Zealand’s trade surplus in June was wider than expected thanks to stronger exports. After this export surge, the current account deficit shrank below the 3% of the country’s GDP. The Governor of the Reserve Bank of New Zealand (RBNZ), John McDermott, said that a weaker Kiwi would help balance economic growth.