GDP Numbers Are Coming

26-10-2010

USD

The USD had a repeat performance on Monday basically copying its range trading that took place before going into the weekend. The USD has gained slightly against the GBP, but continues to struggle against the EUR and JPY. The questions surrounding quantitative easing in the U.S. from the Federal Reserve continue to make for a cautious market place as the merits of monetary policy are debated far and wide. Yesterday the U.S. released Existing Home Sales and they showed a slight improvement on the estimate as they came in with a result of 4.53m. However, the sentiment that pervades the housing sector in the States is still negative and today the S&P/CS Composite-20 HPI will be published and is projected to have a result of 2.4%. The CB Consumer Confidence reading will also be released and the anticipated mark is 49.3.

Tomorrow the Core Durable Goods numbers are on the calendar and the end of the week will be highlighted by the Advance GDP. The States is now going into a critical economic period in which investors will be gauging a unique mix of Fed policy, national politics – because of the upcoming election, and consumer spending. Wall Street continues to turn in gains, but its trading can be described as lacking conviction as many investors continue to sit on the fence and wait for signs of greater stability. The Advance GDP may provide some insight considering that the Fed has been issuing cautionary tones the past two FOMC meetings. Trading sentiment has centered on the belief that the Fed is going to partake in a rather strong round of quantitative easing. The USD finds itself battling the weaker side of its values against many of the major currencies.

EUR

The EUR has consolidated in range against the USD the past week as it has shown little inclination to give back its gains. Greece continues to spark interest among investors who still hear plenty of warnings that its austerity measures will fail and that its growth projections are too rosy. The prospects of austerity measures across Europe continue to spark unrest and this has been most evident in France with large general strikes pervading. However in the midst of questions regarding weak growth and tough spending cuts, the EUR has been able to gain against the greenback. Industrial New Orders were published for Europe yesterday and they beat estimates with a result of 5.3, beating the expected gain of 2.1%. Today the GfK German Consumer Climate reading is on the schedule and the projected mark is 5.2. The EUR has found considerable backing the past month and a half, but the question on investor minds is where ‘fair value’ actually should be. This may explain why the EUR has found some consolidation the past week.

GBP

The Sterling has underperformed the past week and a half compared to the other major currencies when gauged against the USD. The reason for this is because the U.K. is known to be struggling with its stated goals for growth and there is speculation that the Bank of England may be forced into another round of quantitative easing – much like the shadow over the Federal Reserve in the United States. Today the Prelim GDP will be released and the forecast is calling for a gain of 0.4%. Investors will watch the GDP result carefully and will want to take into consideration if the economy is slowing down. Having said that, the U.K. has produced surprises with the GDP results this year and traders will have to be on their toes when this number is released. If the growth number is worse than expected it could spur on some GBP selling.

JPY & AUD

The JPY continued to find itself moving towards the strongest realms of its value against the USD on Monday. Trading has been fairly consolidated within the Japanese currency and many investors are keeping their collective eyes on the upcoming Bank of Japan meeting that is scheduled early Thursday with its monetary policy statement. Last month produced a warning regarding the JPY’s strength and an intervention. Traders should keep their eyes on the JPY. The AUD also continues to find itself at the highest points of its value against the USD. The price of Gold has come off of its highs the past few trading sessions and its results are being watched by all. The AUD and Gold both find themselves as a testing ground.

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