Unexpected Growth in Germany May Lead ECB to Earlier Tightening

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EURUSD – Euro-Zone 2Q GDP contracted by -0.1% but beat estimates of -0.5% as Germany and France unexpectedly saw growth for the period . At the same time, GDP contracted at an annual pace of 5.9% versus forecasts for a 6.6% contraction, while the seasonally adjusted figures crossed the wires at -7.1% versus -7.6% expected.The broader index was weighed down by Lithuania contracting at a double digit pace for the second quarter in a row. Economic activity in Germany unexpectedly improved during the second quarter, with the growth rate expanding 0.3% amid expectations for a 0.2% drop in GDP. The European Central Bank stated in its monthly bulliten that it anticipates a retrun to growth by 2010 which could start to raise interest rate expectations as they look to stem off future infaltion. Discuss the topic and your trade ideas in the EUR/USD Forum.

USDCHF – Producer and Import Prices in Switzerland were slightly weaker than expected, with the monthly reading holding flat in July versus expectation for a 0.1% gain. Meanwhile, the annualized rate crossed the wires at -6.1% amid a -5.8% forecast, which was the largest decline in nearly 34 years, and the slump in crude oil may continue to hamper the outlook for inflation as energy prices remain well below the previous year’s peak. Mounting risks for deflation could lead the Swiss National Bank to intervene in the currency markets again as policymakers pledge to stem the appreciation in the exchange rate.