German GDP slows down, Germany and France to meet today on EU issues

Data on German GDP showed the nation’s growth almost stalled in Q2 after it rose 0.1% from last quarter’s 1.3% rise in growth before a report that will probably show euro-area gross domestic product cooled. The slowing recovery may add to concern nations will struggle to curb budget deficits, with France and Germany set to meet amid growing calls from investors for policy makers to do more to stamp out EU’s debt crisis. U.S. data may also show housing starts fell, while factory production increased. Sarkozy and Merkel are meeting after debt concerns rattled France last week. After a July 21 EU agreement to bolster the region’s rescue fund failed to calm markets, calls are growing for Merkel and Sarkozy to discuss joint borrowing or a mutual guarantee among the 17 euro states, policies that Germany and France have previously rejected. Doubts over France’s AAA credit rating hammered shares in the country’s banks and sent the risk premium of its government bonds above Germany’s to a EU record as the ECB began buying Spanish and Italian debt.

Fed’s Lockhart said the central bank could purchase more Treasuries or alter its balance sheet if the U.S. economy were to slow further. The FOMC lowered its economic assessment, saying it now “expects a somewhat slower pace of recovery over the coming quarters.” It left the door open for more action, saying it discussed “the range of policy tools available to promote a stronger economic recovery.” In other news, minutes of the RBA’s Aug. 2 meeting showed policy makers were concerned that turmoil in financial markets could slow global economic growth. The case against tightening at this meeting was that the downside risks to demand had probably increased, as a result of the acute uncertainty in global financial markets. This in turn could weaken the outlook for demand relative to the central forecast and, over the medium term, dampen the inflation outlook.

EURUSD weakened to 1.4365 after German growth almost stalled, GBPUSD weakened to 1.6323 ahead of UK inflation report, AUDUSD lowered to 1.0407 after RBA minutes of meeting, USDJPY traded at 76.74 lows, USDCHF traded at 0.7860 highs, Gold climbed back to $1779 highs and Oil declined to $86.88 lows.
EU GDP data, Trade balance, US Building permits, housing starts, import price index, industrial production form today’s economic calendar.