What a comeback by Uncle Sam! What looked like a surefire loss turned out to be not-so-bad, as the greenback was able to buck its earlier losses. After hitting a high at 1.3120, EUR/USD came crashing back down to finish at 1.3050, just 3 pips higher than its opening price. Meanwhile, GBP/USD backed off the 1.5700 handle to close at 1.5677, right smack at its opening price.
So changed that allow the dollar to rally?
Apparently, we saw a mini wave of risk aversion creep back into the markets, as we received some disappointing GDP figures. The U.S. economy grew 1.8% last quarter, which was below the expected 2.0% figure. That figure, along with rumors that France may get downgraded, spooked the markets and helped the dollar rally.
In other news, initial jobless claims came in slightly better-than-anticipated, printing at 364,000. This was below the expected 376,000, and also marked a small improvement from last week’s 368,000 number.
Meanwhile, the revised University of Michigan consumer sentiment index came in at 69.9, which was a decent improvement from the initial report’s score of 67.7.
For today, we’ve actually got a slew of red flags coming up during the New York session.
At 1:30 pm GMT, both the core durable goods and core PCE price index will be released. Expectations are that core durable goods orders grew by 0.5% last month. If today’s report comes in worse-than-expected, it could spark another wave of risk aversion. As for the PCE price index, just remember that this is the Fed’s preferred measure of inflation and it is expected to show that inflation remains subdued at 0.1%. Any major deviation from this figure may elicit a strong market reaction, so be careful.
Later on at 3:00 pm GMT, new home sales figures will also be available. Word is that the annualized rate of new home sales increased from 307,000 to 314,000 in the past month. Take note that we’ve seen mixed results from the housing sector this past week, so don’t be surprised if the report comes in exceedingly better or worse than projected.
That’s it for this week folks! Let me just wish you a Merry Christmas! Hopefully you get an early Xmas present and make some pips today!