Data reports out today have caused the “gloom and doom” crowd to pause today, as positive sentiment is starting to filter back in. GDP reports out of the Euro zone came in better than expected, led by Germany’s increase of 4.1% vs. an expectation of 2.4%.
In addition, CPI figures in the US came in as expected at 1.2%, and retail sales figures came in slightly lower than expected to advance .4%. I think the major take away from the US data is that it wasn’t negative, and there are still signs of life in the US economy.
Whether or not this will encourage risk appetite going into the weekend is another story. The markets look a bit tired here, with investors content that the bleeding has stopped. For now.
Consumer confidence figures are due out later this morning, which will whether or not sentiment is improving.
Overnight, New Zealand reported better than expected retail sales figures.
In the forex market:
Aussie (AUD): The Aussie is higher on slight risk-taking as the positive economic data this morning and rhetoric surrounding a potential Japanese currency intervention.
Kiwi (NZD): The Kiwi is also higher as retail sales figures came in higher, besting expectations by a wide margin. Analyst estimates were for a gain of .3%, and the report showed a gain of 1.3%. However, housing prices fell 1.2%, paring back gains on the Kiwi. The jump in domestic demand is encouraging for NZ, but unlikely to change sentiment surrounding a rate hike at the next policy meeting.
Loonie (CAD): The Loonie is also higher as oil prices have rebounded slightly from recent selling to just under $76. Auto sales in Canada came in better than expected boosting confidence that the Canadian consumer is not dead.
Euro (EUR): The Euro is mostly lower this morning as German GDP figures helped boost overall GDP figures in the Euro zone. GDP came in a 4.1% vs. an expectation of 2.6%, likely the result of increased exports due to a lower Euro. This helped boost overall Euro zone GDP figures to 1.7%, vs. an expectation of 1.4%. However, there is increased concern coming from Greece and Spain, where the debt problems have returned to focus. This may be a case of not wanting to be long the Euro going into the weekend.
Pound (GBP): The Pound is following risk themes this morning, trading lower against the commodity currencies but higher vs. Dollar and Yen. There was no real news for the Pound this morning, but next week the UK will report CPI data, as well as release the minutes from their most recent rate policy meeting.
Dollar (USD): The Dollar is selling off this morning as slight risk taking has reduced demand for the greenback. The Dollar has been on a tear as of late, so reduced demand due to “OK” economic data has brought about a welcome pause.
Yen (JPY): The Yen is lower against all but the Euro, as intervention speculation is beginning to heat up. In addition, the Nikkei closed higher overnight, after experiencing a few days of losses. The major question will be whether or not the BOJ will succumb to political pressure to weaken the Yen’s recent strength, which put in a new 15-year high vs. the Dollar.
Well if it isn’t bad, it must be good. At least that’s the sentiment today surrounding the forex market. Potential risks from the Euro zone due to debt concerns have been balanced by good GDP data.
How long this will last is anyone’s guess, as the Euro has bounced significantly from its June lows. Euro investors are taking the “better safe than sorry” approach today as we head into the weekend.
Japanese GDP figures are due out at the beginning of next week, and if they come in weaker, could induce more speculation of currency intervention.
So the market is taking a much needed breather today, having dodged potential landmines from US data. I’m about to do the same.
Have a great weekend!
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