Intraday Market Thoughts

UK GDP As Expected; More USD Selling

by Adam Button
Jul 26, 2011 13:12

FX markets consolidated during the London session after the greenback was sold across the board in Asia. Euro ignores lower German Consumer Climate data and GBP is higher despite poor GDP numbers. Market turns to US consumer confidence & New Home Sales.

USD experienced major weakness during the Asian session as US debt ceiling woes continue with little progress. As long as no deal is announced and USD debt downgrade looms, USD selling is likely to continue. Amid the USD selling frenzy, the NZD and the CHF reached new historical highs above 0.87 and bellow 0.80 respectively.

Sentiment towards the USD is so poor that unless data releases surprise significantly, they play only a minor role. German GfK Consumer Climate for August came out slightly lower at 5.4 from previous 5.5 and second quarter GDP in the UK was in line with expectations at 0.2% but lower from previous 0.5%. On year over year basis UK GDP grew at 0.7%. GBP reacted positively to the GDP data as rumors of extremely weak print were floating around the dealing desks before the release.

The UK data were released after our Premium trades hit their 0.8880 targets in EURGBP. Ashraf's premium trades have focused on silver, whereby he used his signature approach on Gold/Silver Ratios against Silver to make his case for the upcoming trades.

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New York session is rich with data today. The S&P/CS Composite House Price Index in May is due at 9:00 am ET and is expected to have decreased by -4.6% from previous -4.0% y/y. The selling price of a single family home has been decreasing gradually since July 2010 and is reaching contraction levels not seen since the beginning of 2010.

July Consumer Confidence data is due at 10:00 am ET and is expected to decrease for the fourth time in a row. The print is expected to decrease to 57.1 from previous 58.5. June New Home Sales are expected to stay in a range seen over the past quarter and the expected print of 321K would be only a slight improvement from previous 319K.

Finally, July Richmond Fed Manufacturing Index is expected to improve again to 5 from 3. In May this index dropped to -6.

As the US economy continues to slow down and the US political bickering goes on, traders may get another reason why to sell the USD. It is hard to imagine that any of these data releases would surprise to the upside.


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