Prelim GDP Buzz Saw Approaches

The USD buzz saw continued yesterday as it lost ground to the EUR and GBP in markets that are apparently rewarding other currencies due to glimmers of hope in the U.S. economy. Yesterday the U.S. released it Core Durable Goods numbers and it turned in an increase of 0.8% compared to the forecast of minus -0.4%. This might have set the tone for Wall Street which turned in a positive day. However, other releases and even other parts of the data from the Core Durable Goods report were not so glimmering. The previous month�s Core Durable Goods figures were actually revised downward. New Home Sales turned in a negative 352K outcome, the estimate had been 363K. Weekly Unemployment Claims were also reported and came in with a slightly better number of 623K, the forecast was 628K, but a figure over 600K is nothing to brag about.
Today the U.S. will release its Preliminary GDP statistics and it is anticipated to be minus -5.5%. The previous GDP report was minus -6.1%, so if the projection holds it would be an improvement but not a glorified result. Chicago PIM data and Consumer Sentiment publications are also due from the States, but it is the GDP outcome that will be monitored closely. Also making its way into the sentimental soup today will be the developing saga of General Motor�s approaching bankruptcy. While the stock markets appear to be grasping at anything that has the potential to be comforting and express the potential for stability and growth, there are dark clouds which must be watched. Reports coming out from several housing sources say that the actual rate of foreclosures is increasing in the U.S. and is not projected to improve anytime soon. The USD continued it decline to the weak side of its range against the EUR and GBP on Thursday in the wake of good results from equities. Investors will be watching the GDP numbers carefully today and its outcome will affect the entire marketplace.
The EUR bounced back on Thursday against the USD and is firmly at the high end of its range. Germany published its Unemployment Change numbers yesterday and it turned in a good result of 1K compared to the estimate of 66K. The broad European Consumer Confidence data was released too and it turned in a reading of minus -31, slightly worse than the estimate of minus -30. Today the German�s will release their Retail Sales findings and they are anticipated to have a rise of 0.3% compared to last month�s drop of -0.4%. The EUR has largely been trading in a dollar centric mode this week because of the important economic data coming from across the Atlantic and positive results from global equities markets. The ECB is meeting next week and some investors may begin to look at fundamental flaws that exist in the EUR too. No major economy has been immune to the economic downturn and the question could become - just how long the EUR can continue this positive run?

Sterling shined brightly on Thursday, marching forward to highs in what has been a stable bull run against the USD. The U.K. published its CBI Realized Sales survey yesterday and it turned in a reading of minus -17, worse than the forecast of minus -10. Today the Nationwide HPI data is on the calendar and a figure of minus -0.9% is anticipated. The U.K. economy is burdened like the U.S. with poor numbers from the housing sector and it is a vital cog in the machine to have run properly in order to build a sound foundation. Having had a positive surge against the USD for some time now the GBP enters Friday with a curious group of onlookers.
The JPY found itself under pressure again on Thursday losing ground to the USD. As international equity markets resumed their optimistic mood yesterday it appears that risk appetite may be increasing in Asian trading and the JPY is benefiting from the move. �Appears� is the critical word however. This because Gold found itself trading at the high end of its range yesterday, exceeding 965.00 USD an ounce. While it would be easy to say that Gold has gone up as the USD has gone down, it must also be noted that some measure of market uncertainty clearly remains. Thus, we are seeing clear boundaries being drawn between the bulls and the bears � optimism versus pessimism. The JPY sits in the middle of the storm.
Written by: Robert Petrucci
Bforex Chief Commodity Expert and Forex Analyst