European session review: the pound has fallen against the US dollar

The following data was published:

(Time / country / index / period / previous value / forecast)

6:00 Germany Industrial Production (m / m) July 1.1% 0.2% -1.5%

France 6:45 Trade balance, bn -3.5 -3.7 -4.5 July

7:00 UK House Price Index from Halifax, m / m in August -1% -0.2%

7:00 UK House Price Index from Halifax, 3m y / y in August 8.4% 6.9%

8:30 UK Industrial Production m / m in July 0% -0.2% 0.1%

8:30 UK Industrial Production y / y in July 1.4% 1.9% 2.1%

8:30 UK Manufacturing production m / m in July -0.2% -0.4% -0.9%

8:30 UK Manufacturing production, y / y in July 0.6% 1.7% 0.8%

The pound depreciated moderately against the dollar, having lost part of the earned positions yesterday, which was caused by the publication of controversial statistical data on industrial production in the UK. The pressure also helped the dollar to recover against major currencies.

Office for National Statistics (ONS) showed that industrial production in the UK rose in July by 0.1 percent after flat in June. Experts predicted that the production will be reduced by 0.2 percent. Production decreased by 0.9 per cent, exceeding the estimate (-0.4 per cent) in the manufacturing sector, and speeding up the pace compared to June (-0.2 percent). Meanwhile, production in the mining and quarrying sector increased by 4.7 percent. In addition, the ONS reported that annual industrial production growth accelerated to 2.1 percent compared to 1.4 percent in June. This was the fastest growth in three months. It was expected that the figure will increase by 1.9 percent. Manufacturing output increased by 0.8 per cent y/y, after rising 0.6 percent in June (revised from +0.9 per cent). Analysts had forecast an increase in production by 1.7 per cent.

However, the report submitted by Halifax showed that house prices in Britain fell in August, continuing the July trend. As a result of this change the annual growth rate fell to its lowest level for more than a year. House prices fell in August by 0.2 percent after declining 1.1 percent in July. Meanwhile, the annualized price growth slowed to 6.9 percent from 8.4 percent the previous month. Economists had forecast that prices will fall by 0.4 percent compared to July, and will grow by 7.0 percent y/y. For the three months (to August) prices were 0.7 percent higher than in the previous three months, but it was the slowest quarterly growth rate since December 2014. Halifax noted that the number of real estate transactions is also falling - in July, the number of home sales decreased by 1 percent compared with the previous month.

The euro traded in a narrow range against the US dollar, which was due to the lack of new catalysts, as well as the expectations of the ECB meeting. The Statistical Office of Germany reported that industrial output fell sharply at the end of July, registering the largest drop in 23 months, which is another sign of slowing from Europe's largest economy. The report stated that the volume of industrial production decreased by 1.5 percent compared to June. Economists had expected an increase of 0.2 percent. Increased production in the construction sector (+1.8 per cent) and energy production (2.6 percent) was offset by a decline in the manufacturing industry (-2.3 percent).

According to a poll of 70 economists, conducted by Reuters, the ECB will leave its monetary policy unchanged in September, but by the end of the year a QE extension is likely. In addition, many analysts expect the Central Bank will hold its refinancing rate and the deposit rate - at 0.0 percent and -0.4 percent respectively by the end of 2017. The majority of economists said that the central bank will extend its monthly bond purchase program, which will end in March 2017. Few economists have noted that the ECB will soften the policy again by the end of the year, either by reducing the rate and / or expansion of QE program.

EUR / USD: during the European session, the pair is trading in the $ 1.1228- $ 1.1264 range

GBP / USD: during the European session, the pair fell to $ 1.3357

USD / JPY: during the European session, the pair rebounded to Y101.71 from Y101.19