Global macro overview for 27/07/2017:
The UK second quarter growth data were in line with expectations. The market participants expected a slight increase in GDP from 0.2% to 0.3% on monthly basis and a slight decrease from 2.0% to 1.7% on a yearly basis. The biggest contribution to the GDP was noted in the services sector, which registered 0.5% growth for the quarter from 0.1% in the first quarter ( strength come from distribution, leisure, and retail spending). On the other hand, the industrial output declined 0.4% in the latest 3 months while construction output declined 0.9%.
The contraction in the industrial and construction sectors might trigger a significant concern over the underlying structural weaknesses and weak investment, although there will be doubts surrounding the data's accuracy given GDP survey evidence. Nevertheless, the overall confidence in the UK GDP growth is still fragile as the lack of increase in wages will influence the consumer spending, the major sector of the overall UK economy. In this context, strength in other sectors of the economy will be crucial to support overall growth and the latest release will trigger further doubts whether the rebalancing is achievable. In the result, as noted many times before, the recent disappointing data set from the UK economy and a big miss in inflation readings will put more pressure on the British Pound across the board.
Let's now take a look at the EUR/GBP technical picture at the H4 timeframe. After establishing a marginal new high at the level of 0.8994 the price is reversing towards the next technical support at the level of 0.8898. Breakout below this zone will open the road towards the next important support area between the levels of 0.8717 - 0.8754.
