Bernanke and GDP

The broad markets turned cautious on Thursday as investors began to brace themselves for the speech that will come from Ben Bernanke later today. The economic symposium at Jackson Hole, which will include central bankers and academics from the world over will get plenty of attention today and tomorrow. The U.S. and U.K. do release GDP data today and this will certainly be of an interest too as questions about a possible recessionary climate continues to hover the major economies. The EUR/USD has been within a tight range the past few sessions and the air of uncertainty that hangs over both the ECB and Fed are not allowing for much in the way of bright prospects. The question all traders are asking is if and when the pair will begin to show some cracks. There are many negative signals coming from Europe, but there is an equal amount of rather troubling economic aspects emerging from the States.

Gold inched higher on Thursday a day after giving up a large amount of value. The precious metal despite its losses on the previous day finds itself still in rather high territory as investors concerns about the global economy and the health of some currencies abounds. Gold as of this morning is trading around 1770 USD an ounce. The AUD stayed range bound like the other major currencies on Thursday as investors show that they are more concerned about growth prospects. The GBP has stayed within a EUR centric mode, but today’s U.K. GDP number could affect sentiment before going into the weekend. The Bank of England continues to mirror the Federal Reserve with its near zero interest rate policy and this is unlikely to change anytime soon considering the slow growth that has been experienced.
The JPY has lost a bit of ground to the USD the past two trading sessions, but before going into the weekend must be watched carefully particularly if safe haven trading ramps up. The Japanese government has made it known that they intend on tackling the strong JPY problem that is having a negative effect on Japanese exporters, but the question is how much in the way of ammunition does the Bank of Japan really have if they cannot coordinate anything with any other Central Banks.

The question of ammunition is a big one facing Ben Bernanke too today and tomorrow. He has been widely anticipated to introduce some type of new stimulus plan, but it remains unclear how he will accomplish such a task. The fact that the U.S. is going into a major election year for 2012 will not make his actions any easier and will raise concerns among fiscal hawks within the Republicans. The U.S. remains locked within a tough employment, housing, and consumer period. Today’s Preliminary GDP is expected to be 1.1% which is a low growth rate to begin with. Investors while keeping their eyes on Bernanke will also be keen on seeing some type of positive outcome from the GDP. A negative surprise will certainly have a noticeable effect on the markets. It is interesting that Ben Bernanke is scheduled to speak about an hour and a half after the GDP numbers are published - and this will deliver a strong one two punch for Wall Street.

The Forex markets have been rather cautious for nearly two weeks taking into consideration the amount of volatility seen in equities recently. Today is going to be an eventful day, but it is possible that news will continue to emerge from Jackson Hole tomorrow also which could mean that Monday’s opening will be a dynamic one too. Traders will have to be attentive. The markets are likely to be rather cautious until later today.