Japanese Leading Index Slips To Six-Year Low, U.K. Data Disappoints

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GBPUSD - Industrial production in the U.K. fell another 2.3%, which was well beyond the 2.0% decline projected by economists, and marks the biggest decline in three years. Furthermore, manufacturing activity fell for the sixth consecutive month to -1.9% in August, signaling that Europe's second largest economy may have slip into a recession as the downturn in the economy accelerates. The housing and credit crisis paired with instability in the financial market has clearly becoming a growing concern for the U.K., with market participants raising bets that the BoE will cut the benchmark interest rate by 25bp this week as growth prospects deteriorates.

EURUSD - German factory orders rose 3.6% after falling 1.3% in July, which was much greater than the 0.5% increase expected by economists. A deeper look into the report showed that domestic orders increased 3.7% while foreign demands rose 3.5%. Amid the larger than expected gain, orders plunged 7.6% on an annual basis, which only strengthens the argument for the ECB to lower the benchmark interest at their next meeting.

USDJPY - The leading economic index for Japan slipped to a six-year low of 89.3 from 91.4 in July, signaling that economic activity has deteriorated considerable since the first half of the year. Meanwhile, the coincident index fell in line with expectations as the index slipped to 100.7 from 103.5, which suggests that economic activity may deteriorate further as the world's second largest economy teeters on the brink of a recession. Indeed, the Bank of Japan decided to hold their benchmark rate steady at 0.50% as widely expected, but noted that the economy may have slipped into a recession for the first time in six years.

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