UK GDP, the Fed and Oil in Focus

It should be an interesting day for markets on Wednesday, with the UK releasing data on second quarter growth this morning, the US Federal Reserve announcing its latest decision this evening and crude inventory data being released after API reported a substantial reduction.

Will UK Get Summery Boost in GDP Data?

Data this morning is expected to show growth in the second quarter in the UK improved slightly from the first but remained mediocre, as the consumer squeeze continues to take its toll. Markets are expecting growth of 0.3% in the quarter but I do wonder whether the warmer weather in the quarter and the spike in consumer spending associated with it could spring a surprise on us this morning.

A positive surprise on the GDP report could be what the pound needs to finally break significantly above 1.30 against the dollar, with the pair once again struggling to make any serious move above here.

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FOMC Statement Could Hold Balance Sheet Clues

Another factor here today will be the FOMC decision later, or more likely the statement that accompanies it. The Fed is unlikely to raise interest rates again today having just done so in June, but we could get some insight into whether it will start reducing its balance sheet from September. The Fed has been discussing this for some months now and it may use today’s statement to warn markets ahead of the next meeting.

Something in the Air

Brent Spikes Above $50 on Huge Inventory Draw

Brent crude surged back above $50 on Tuesday after API reported a 10.23 million barrel drawdown in oil inventories, the biggest decline since September. The drop comes shortly after some of the world’s largest oil producers met to discuss progress with the cuts and after data showed Saudi exports to the US have been declining over the last month.

It will be very interesting to see whether EIA reports and similar number today and, if so, whether traders will see this as a sign that the latest cuts are working or just a blip in the data. We’ll need to see a few weeks of data to be sure but this coming when the US is importing less from Saudi Arabia may not be a coincidence. The surge through $50 may support this view and further gains could follow if EIA confirms the numbers today.

Fed to Offer Little Support for USD

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam