USD Higher on Growing Geopolitical Tension

Market Reviews

The British pound remains under pressure despite generally positive economic data. GDP growth in the UK has doubled in the second quarter due to stronger growth in both services and construction, The Office for National Statistics reported, that gross domestic product grew by 0.4% in the second quarter after rising 0.2% in the first quarter. The rate was in line with expectations. In annual terms, GDP grew by 1.3% after rising by 1.2% three months before.

US dollar, Japanese yen and Swiss franc are trading as the strongest ones today as supported by solid safe haven flow. USD is also firm after stronger than expected core inflation reading.

US consumer price inflation rose by an annualized 2.9% in July, missing expectations for an acceleration to 3.0%. Core CPI, a key gauge of underlying consumer price pressures that excludes food and energy costs, increased by 0.2% from a month earlier, in line with forecasts. In the 12 months through July, core CPI rose 2.4%, compared to 2.3% a month earlier. Economists were looking for it to hold steady at June’s 2.3% advance.

The free fall in Turkish Lira raised concerns of contagion to Eurozone financial system and sent the euro broadly lower. The single currency fell to its lowest levels more than a year after the announcement that the European Central Bank (ECB) is increasingly concerned that banks are reacting to a sharp decline in the Turkish lira.

Global shares were down today. DAX fell by 1.78%, CAC was down 1.29% and FTSE dropped by 0.71%. Earlier today, major Asian indices closed lower, except China. Nikkei closed down -1.33%, Hong Kong HSI down -0.84%, Singapore Strait Times down -1.26%. But Shanghai SSE rose by 0.03% to 2795.31.

Growth of the Japanese economy accelerated in the second quarter, helped by strong household and business spending. Government data showed, that Japan's GDP grew by 1.9% on an annualized basis in April-June, beating a median market forecast for a 1.4%. That followed a revised 0.9% contraction, larger than initial estimates, in the previous quarter. Compared with the previous quarter, gross domestic product increased by 0.5% in Q2, more than the forecast of a 0.3% increase and following a 0.2% decrease in Q1.