Trading news

GDP Numbers To Mark Headlines During The Week

While early week Inflation and housing numbers helped the US Dollar to extend its prior gains, surprisingly hawkish comments in FOMC meeting minutes strengthened concerns that the Federal Reserve is close to announce another rate-hike. Additionally, some of the influential Fed policy makers were also found favoring the rate uplift in June and propelled the greenback index, the US Dollar Index (I.USDX), to secure third weekly positive closing, the longest winning streak since January. The USD, even after registering across the board gains, failed to strengthen against the GBP as polls indicating more of the "Bremain" chances, in addition to positive UK job numbers, supported the Pound's upward trajectory. Moving on, the EUR remained sluggish while commodity currencies stretched their downside and the JPY ignored higher than expected GDP number as BoJ Governor said that the central bank stands ready to weaken the currency if needed. Moreover, the Crude maintained it's north-run with weaker oil production report from US and supply worries at Canada and Nigeria threatening the global supply-glut.

Unlike last week, the present week has fewer economic data-points/events scheduled for publish, amongst which Flash readings of EU & German PMIs are already out; however, second estimates of US and UK GDP, coupled with US Durable Goods Orders, housing numbers and monetary policy meeting by the BoC, are some front-line details, up for release, that could portray this week's trading pattern.

After Fed Hawks, GDP To Drive US Dollar Moves

"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the committee's 2% objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June"

Although the aforementioned line from recent FOMC meeting minutes triggered speculations for Fed's rate-hike, unlike most of its global peers, phrases like "if incoming data were consistent with economic growth picking up in the second quarter…" puts more emphasis on Friday's second estimate of US Q1 2016 GDP number.

While last three numbers from the US GDP Q-o-Q detail keep raising bars for the Federal Reserve's rate-change decision, recent upticks in Manufacturing and Factory Order details, coupled with improvement in Retail Sales and CPI, favor expectations of a 0.8% growth number against the initially estimated 0.5% mark.

In addition to the front-line GDP release, Tuesday's New Home Sales, together with Durable Goods Orders and Pending Home Sales, up for Thursday, are some other data-points that the USD traders should look at. Market consensus relating to all these details indicate mixed view as New Home Sales is expected to test three month highs with 521K against 511K and the Pending Home Sales is likely registering slow growth figure of 0.6% compared to 1.4% prior. Further, the Durable Goods Orders growth is likely to slow down with 0.3% mark as compared to 0.8% prior and the Core Durable Goods Orders may reverse its prior contraction of -0.2% with +0.3% gains.

Considering the recent optimism relating to Fed-rate hike in the month of June, backed by positive data-points, an upbeat GDP number becomes a boost for speculations governing rate-lift decision and can propel the USD further towards north. Alternatively, sluggish growth number can spread disappointment and might reverse the greenback's recent gains.

UK GDP Becomes Important For GBP

Alike USD, the GBP also enjoyed recent stream of positive data-points, which together with expectations of the Britain not leaving the EU, has been strengthening the Pound; however, second estimate of Q1 2016 UK GDP, up for Thursday, becomes important for the GBP traders. Considering latest UK numbers, chances are higher that the GDP growth could surpass its 0.4% consensus, which is same as the initial forecast, and can support the GBP's further up-move; though, a weaker reading might raise doubts on its up-move and can pull the currency again towards south. Additionally, numbers relating to chances of "Brexit" and "Bremain" could also contribute heavily towards forecasting the British currency's move ahead of June referendum. During weekend, the polls again took a U-turn and showed that there are more people who wish to vote for Britain leaving the EU. Should such polls continue showing favor for "Brexit" ahead of referendum, the GBP is more likely to reverse its near-term gains.

BoC Meeting & New-Zealand Trade Balance Are For CAD & NZD Traders To Observe

Wildfires in Canada's oil-sands have been dragging the Canadian Dollar (CAD) off-late that the Loonie, as it is mostly known, fails to reciprocate the advances of Crude Oil price, Canada's main export. However, CAD traders would closely examine details of monetary policy meeting by the Bank of Canada (BoC), scheduled on Wednesday. Although market expectations negate chances of any rate-cuts by the Canadian central banker, tone of the policymakers in rate statement, together with clues as to how the recent wildfire affected the economy, are likely details to be observed. Given the central banker discusses threat on the economic system due to recent accident, chances of the CAD to extend its downside can't be denied.

At the New-Zealand economic calendar, the monthly details of Trade Balance, up for Tuesday release, is the only detail for the NZD traders to follow. With recent New-Zealand details have been positive, the Kiwi (NZD) refrained from registering larger losses than its Australian and Canadian counterparts. However, lesser trade surplus, considering the forecast of 25M compared to 117M prior, can trigger the NZD's fresh south-run.

EU & German Details And The Japanese Inflation Numbers Are Last To Follow

Having witnessed muted response to upbeat German Flash PMIs, mainly due to weaker than expected EU PMIs, Tuesday's German & EU ZEW Economic Sentiment and the Wednesday's German Ifo Business Climate become rest of data-flow for EUR traders to worry for. While both the ZEW sentiment indices are likely to mark upbeat numbers, with 12.1 & 23.4 for Germany and EU respectively against 11.2 & 21.5 prior, the German Ifo Business Confidence gauge is expected to rally towards three month highs, to 106.9 from 106.6 prior. Given these sentiment gauges print positive numbers, the EUR can pare some of its recent losses; though, soft numbers, which are more likely, can provide further weakness to the EU currency. Moreover, concerns relating to the EU referendum, to be held on June 23, might also fuel liquidity into the pair's connecting EUR.

Mounting speculations over the Bank of Japan's (BoJ) next move towards controlling the JPY strength may gain important signal from Friday's CPI numbers. As both the headline inflation gauges, namely Tokyo Core CPI & National Core CPI, are likely to drop deeper into negative territory, with -0.4% forecast & -0.3% prior, an actual outcome either meeting or surpassing the forecast on pessimistic side can force the Japanese central bank to go ahead with its plan to further monetary easing, which in-turn could provide additional damages to the JPY.

Follow me on twitter to discuss latest markets events @Fx_Anil

Tuesday, 24 May, 2016 / 4:47

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