The British Pound and the Euro may rebound after yesterday’s losses as supportive UK GDP and German IFO data offer a boost to ECB and BOE policy expectations.

Talking Points

• Pound, Euro May Rise as Economic Data Boosts Monetary Policy Outlook

• Dollar to Decline on Fading Fed QE “Taper” Bets if US Data Disappoints

Second-quarter UK GDP figures headline the economic calendar in European trading hours. Expectations call for output to rise 0.6 percent, marking the best performance since the three months through September 2012. The pickup would be consistent with a marked improvement in UK economic data in the April – June period and may boost the British Pound as traders perceive normalization on the growth front as limiting scope for additional stimulus from the Bank of England.

Meanwhile, the German IFO survey of business confidence is expected to see the headline Business Climate gauge pushing higher to 106.1, the highest in four months. News-flow from the currency bloc has increasingly outperformed relative to consensus forecasts (according to data compiled by Citigroup), which seems to have been at least somewhat supportive for ECB policy expectations. Meanwhile, the Euro continues to track closely with the front-end yield spread, suggesting another strong print this time around may underpin the rates outlook as help the single currency renew its push higher.

Later in the day, the spotlight shifts back to the US docket. June’s Durable Goods Orders report and the weekly Jobless Claims roundup are focus, with moderate deterioration expected on both fronts. On the whole, US economic outcomes have returned somewhat lackluster results compared with consensus forecasts over recent weeks. This keeps the door open for disappointing news-flow that undercuts speculation about a near-term move to “taper” Federal Reserve stimulus efforts and rekindles downward pressure on the US Dollar.

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