Skeptics were given GDP data from the U.S. on Thursday that confirmed that the American economy is not doing as well as official estimates have pronounced. The Prelim GDP yesterday came in with a result of 1.8% compared to the predicted 2.2% gains. The weekly Unemployment Claims also disappointed official projections and came in with a number of 424k, which was higher than the forecast of 403k filings. Within the midst of these poor outcomes Wall Street managed to turn in small gains actually. The USD was punished however as the EUR climbed further in value even though the Single Currency has not escaped the woods either regarding its own problems. The U.S. will see Consume Sentiment reading from the University of Michigan today, along with Pending Home Sales figures.
In essence the U.S. once again was taken down a notch in terms of economic sentiment with lackluster GDP results. Data from the States has been missing estimates solidly for about two weeks in a row. Today’s reports while not major could provide additional sparks for any fire. The question is what investors will do with this information. The USD has actually lost ground the past two days as confusion in the broad markets has left traders looking for signs as to where risk adverse money will be placed. The USD could still be one of the recipients of safe haven trading, but clearly the movement will not be one way. Before going into the weekend traders are seriously going to have to ask themselves where they want to park their risk sentiment?
The G8 meetings are getting underway in Deauville, France and this will likely put the focus on the Sovereign Debt crisis in Europe. The IMF chair continues to be up for grabs, although it looks like French Finance Minister LaGarde will get the seat eventually after political maneuvering takes place. The EUR has been put under pressure the past three Friday’s in late trading as investors have been reluctant to hold positions going into the weekend and it will be interesting to see if there is a repeat performance of that later today. Germany will release Prelim CPI data today, but the impetus for the EUR will certainly be any discussions surrounding the Greek debt situation. There are bound to be plenty of speeches today and tomorrow regarding the Greek saga and rumors will have to be deciphered carefully.
The GBP had another good run upwards against the USD on Thursday. The Nationwide HPI is on the calendar from the U.K. today and it is expected to show a miniscule gain of 0.1%. The housing sector in the U.K. remains under pressure and like its counterparts the economy is not showing any massive signs of improvement. The global economic outlook continues to formant the belief that stagnation may be more realistic than a real recovery. The GBP has done well the past two sessions and going into the weekend traders may be tempted to test its range taking into consideration that questions still abound regarding the European sphere and the shadow that the EUR is still casting on the Sterling.
Revised economic outlooks are having an effect on the commodities markets. Gold held steady on Thursday and as of this writing is around 1524.00 USD per ounce. Crude Oil also range traded yesterday. The question is what would take place if risk adverse trading were to grow? The possibility of traders becoming cautious in late trading on Friday should be taken into account. The AUD certainly strengthened yesterday. With the gauntlet of mixed results in the market as data continuing to prove skeptics correct, short term trading is likely to be volatile as hopes meet reality. The market from a philosophical perspective is always right because its prices – the values within the Forex and Commodities markets – cannot be argued. However, long term investors certainly have reasons for concerns when looking at the prospects for the global economy. The JPY actually bounced back to the stronger parts of its range yesterday and once again proved that it remains a magnate when Asian traders have questions about market direction.
Written by bforex.com