The just released GDP figures show that the UK economy recovered strongly in the second quarter, with the services sector, that makes up around two thirds of nation’s output, continuing to be the main driver of growth. The upbeat GDP print, which was in line with expectations, now shifts focus to cues from the central bank on the pace of tightening in monetary policy.

Across the Atlantic, the US Fed will begin its two day monetary policy meeting today, ahead of its interest rate decision and statement tomorrow. Amid rising expectations that the US central bank could begin raising interest rate as early as September, investors will closely monitor the FOMC meeting. Apart from the FOMC, house price indices and flash Markit services PMI will attract some market attention.

Pound Sterling – UK Markets

The just released official figures indicated that the UK economy expanded at a strong pace in the second quarter of this year on the back of robust growth in the nation’s dominant services sector along with a pickup in industrial output. In line with market expectations, the preliminary GDP print indicated that the economy logged in a higher growth in the April to June period, compared to the first three months of 2015. The Pound has picked up momentum and is trading on a firmer footing against the US Dollar and the Euro, post the economic release. A surge in economic recovery after a dismal start earlier this year is likely to add fresh impetus to speculation of an interest rate rise by the UK central bank in the near term.

Yesterday, the CBI's industrial trends survey showed that firms' order books for this month fell to the lowest level since July 2013, as pressure from the stronger Pound and political woes in the Euro zone hampered efforts by British companies to trade overseas.

US Dollar – US Markets

The US Dollar has partly recovered its early losses against the Euro this morning. Sentiment towards the greenback remains mixed ahead of the FOMC's two-day meeting which commences later today. Traders are eager to see if policy setters give any indication on the timing to tighten monetary policy. While the US central bank is not expected to raise interest rate in today’s meeting, the meeting will be in spotlight to gauge the Fed members’ intentions regarding a September rate increase, considering the recent positive trend in economic data and a hawkish shift in the minutes of the last monetary policy meeting. In economic data, investors will keep a tab on the S&P/Case-Shiller home price index, consumer confidence and flash services PMI, scheduled later today, for further direction.

The greenback extended losses against the majors yesterday, as upbeat US durable goods orders data had limited impact on trading in the US Dollar. New orders for durable goods surged higher than market consensus for June, as businesses accelerated their spending plans suggesting a modest expansion in the second quarter GDP data.

Euro – European Markets

The shared currency has surrendered most of its gains against its major currency counterparts this morning. Amid a data thin calendar day in the Euro zone, investors will continue to monitor key developments in Greece in relation to the new bailout package. Meanwhile, trading in the Euro today will likely be determined by economic developments in other major economies. Going forward, market participants will eye the German GfK consumer morale report along with consumer confidence numbers from France, scheduled tomorrow for further direction.

The Greek government and its international creditors comprising the International Monetary Fund and the European Central Bank began fresh round of negotiations on a third multi-billion Euro bailout deal yesterday. Discussions over pensions and labour market reforms would set the stage for high-level talks which are not expected to begin until later this week. Meanwhile, prior to the beginning of talks in Athens, new reports emerged about Greece’s former finance minister’s contingency plans for a Euro exit.

Other Currencies – Highlights

The Canadian Dollar has managed to recover some of its losses against the US Dollar this morning. However the Canadian Dollar is unlikely to sustain these gains as a renewed slide in oil prices and a drop in demand for other commodities due to concerns of a slowdown in the Chinese economy are likely to weigh heavily on the Loonie. On the macroeconomic front, investors today will keep a tab on Canada’s industrial product and raw materials price indices for June and a string of US economic releases scheduled later in the day, for further direction. Meanwhile, investors are treading cautiously ahead of the US Federal Reserve’s monetary policy statement due tomorrow.

Going forward, trading in the US Dollar – Canadian Dollar currency pair will be guided by GDP prints in both the economies scheduled later in the week. Markets anticipate that the preliminary second quarter US GDP print will show marked improvement in economic recovery in the April – June period. On the other hand, growth in the Canadian economy has been weak lately and traders expect a flat reading after four consecutive monthly contractions.