Intraday Market Thoughts

UK Current Account Deficit At Record High

by Patrik Urban
Sep 27, 2012 12:14

Chinese stimulus; record UK current account deficit; UK GDP revised higher; German unemployment rose; Italian auction. Market awaits durable goods orders, jobless claims, GDP revision and pending home sales. EURUSD, USDJPY, AUDUSD, GBPUSD, gold and silver trades from Monday's Premium Insights are in progress. See below for details.

The USD is mixed in the ongoing session. It is weaker against NZD and GBP, stronger against EUR and CHF and little changed against the rest of the majors. European equities are gaining about 0.5% and the relative strength winner is NZD while EUR lags.

Trading has been influenced by rumors of 8T CNY investment/infrastructure stimulus that could be announced after China national day on October 1st.

UK current account deficit widened during Q2 to GBP 20.8 bln from previous deficit 15.4 bln, which is the highest level on record. Today's figures along with Q1 revision to 15.4 bln from initial 11.2 bln point to serious deterioration. GDP was revised higher to -0.4% from initial -0.5% q/q but the annual rate was unrevised at -0.5%. GBPUSD weakened to 1.6155 but quickly rebounded to 1.6217. It currently trades around the 1.6200 figure.

German unemployment rose by 9K in September which is slightly less than anticipated 10K. August result was revised from 9K to 11K. The unemployment rate remained steady at 6.8%. EURUSD trades around 1.2855.

Italy sold EUR 2.72 bln worth of 5 year BTP vs. EUR 2-3 bln target. The average yield declined to 4.09% from 4.73% but cover fell to 1.38 from 1.46. The 10 year yield is slightly higher around 5.25% while the Spanish equivalent trades around 6.05%.

The US session begins at 8:30 am ET with durable goods orders that are expected to drop 4.7% in August after rising 4.1% in July (core orders seen rising 0.2% from -0.6%). Jobless claims are anticipated lower at 378K from 382K and Q2 GDP is seen unrevised at 1.7% y/y.

Pending home sales that are due at 10:00 am are seen falling 0.4% in August after 2.4% growth in July.

Monday evening's Premium Insights test the efficacy of integrating medium term oscillators into short-term momentum changes. These are show in the 3 charts of EURUSD (Monthly) and GBPUSD (Weekly & Monthly). Direct access to trades, charts and rationale can be found directly in here: Non subscribers can join here:


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