The European Central Bank (ECB) published their monthly report in which the central bank lowered their 2011 GDP growth forecast to 1.4% from 1.5%. The ECB went on to add that growth in the third quarter is likely to be “better than expected,” while noting that the euro economy will expand at a “moderate, uneven” pace.
Taking a look at the economic docket, industrial production unexpectedly declined 0.1% in June after climbing a revised 1.1% the previous month amid economists’ forecasts for a 0.6% rise. The breakdown of the report showed that the drop in the monthly figures was lead by the pullback in the production of durable consumer and intermediate goods. Looking ahead, industrial production is likely to face major headwinds over the upcoming months as the recovery losses momentum on the back of governments implementing tough austerity measures to battle their ballooning budget deficits.
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In the currency markets, the EUR/USD extended its three-day decline to reach an intraday low of 1.2798 on Thursday, leading price action to stall at the 100-day SMA. Going forward, a break below this moving average will lead the pair to slip below the ascending channel, which has remained intact since June. In turn, a clear break below the lower bounds of the range would validate additional downside risks towards 1.2500.
By David Song of DailyFX.com
