US GDP figures came in this morning showing an advance of 3.2% annualized, just missing analyst expectations of 3.3%. While there is mild disappointment on the miss, GDP growth of any amount should be seen as positive at this juncture in time. Much of the advance in GDP growth came as a result of personal consumption numbers which were higher than expected, showing that a consumer-led recovery may be underway.
In other news, Canadian GDP figures came in as expected but the market is still concerned that the change in language used by the BOC in this week’s interest rate policy meeting could stall future rate hikes.
In an opposite turn of change of language, the New Zealand central bank Governor left himself “wriggle room”—I always say wiggle but whatever—as the market is increasing its bet that we’ll see a rate hike earlier than the July meeting as was previously forecast.
Meanwhile, deflation is still prevalent in Japan even though household spending and wages are up.
And lastly, Greece austerity measures are predictably causing unrest but it looks like bailout measures will soon be in place. The markets are in risk-taking mode this morning going into the weekend as the next round of news expected out of the EU is thought to be positive as the negative is already “priced in”.
In the forex market:
Aussie (AUD): The Aussie is higher this morning on increased risk-appetite as signs are pointing to a resolution for Greece. A survey of Australia’s trade businesses shows that there is an expectation for a rise in the Aussie dollar going into year end.
Loonie (CAD): The Loonie is lower this morning as the market is paring back expectations of a rate hike based on the backpedalling language that came from the BOC over the last few days. Canadian GDP figures came in as expected so there is some hesitation to push gains in the Loonie despite the risk appetite.
Kiwi (NZD): On the other hand, the RBNZ changed its language to leave “wriggle room” for a potential rate hike at the June meeting as opposed to the expectation of July. This is all incumbent of course on actually having the economic data to support a hike.
Euro (EUR): The Euro is higher this morning as the market is expecting a resolution to the Greek debt crisis to come in soon. Greece has agreed in principle on an austerity package that will satisfy lenders (Germany) and allow a bailout to take place. For those worried about contagion, Spain just officially announced unemployment rates in excess of 20%! Even if the Greece problem gets resolved, there are others lurking in the shadows. Don’t get too excited about the Euro’s prospects just yet.
Pound (GBP): Consumer confidence fell to a 3-month low in the UK heading into next week’s elections, as signs of a slower return to growth is all but expected.
Dollar (USD): The Dollar is lower on risk taking as GDP figures came in slightly less-than-expected but signs that consumer spending is improving is seen as positive. However, Bernanke all but said at the FOMC meeting that the Fed won’t move on rates until they see signs of employment gains, and we’re not quite there yet.
Yen (JPY): In the overnight session, reports have showed that economic recovery is not strong enough yet to fend off deflation, and the Bank of Japan has pledged to help banks lend in order to encourage spending. Consumer prices have fallen for 13 straight months. However, the good news is that spending and wages have increased so there is hope that it will help stimulate the economy. So expect a weaker Yen as BOJ monetary policy and risk-taking could bring about a further increase in carry trades.
So there is some light at the end of the tunnel as good economic figures are starting to pop around the globe. However, the amount of global debt in the marketplace is looming as there are MANY countries that have out of control debt.
So while Greece makes the headlines because they were first, the other PIIGS countries could be next to line up for a bailout. Not to mention the debt levels of the UK and the US. And Japan’s debt as a percentage of GDP is so large that it‘s no longer become a factor.
So you can see the obvious conflict between trying to grow economies and scale back debt to sustainable levels. How this is going to play out is anyone’s guess.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, Australia, bank, Bernanke, cad, carr, carry trade, central bank, course, crisis, currenc, currency, currency market, currency trading, data, dollar, dow, economic, economy, EUR, Euro, fed, forex, forex market, free, fx, fxedu, gbp, Il, interest, interest rate, Japan, jpy, Kiwi, live, loonie, lower, market, meeting, mie, Mike Conlon, new zealand, news, nzd, piigs, pound, practice, practice account, ssi, time, trade, trades, unemployment, USD, Yen