While the EUR continues its struggle against support levels and investors continue to test its recent weakness, investors should pay attention to the Preliminary GDP report which will come from the U.S. in a few hours time.
With an estimate of minus -0.6% being looked for, if the GDP is weaker the USD could give back some of its added value from the past month to the Single Currency. The thinking behind this is the fact that the Fed has made no secret of its almost ‘propaganda’ like sermon that the U.S. economy is improving and wants this drum beat to continue. This has occurred even as hard data from the States has actually been quite lacklustre in the opinion of Digital Markets Advisor – among others. Meaning that if the GDP is weaker than estimated the Fed will have less ground on in order to continue its stance of money tightening per its bond buying program in which it has begun to diminish.
If however (there is always a however in trading) the GDP numbers are stronger than expected, the USD could actually continue its attack on the EUR and keep adding value. Certainly the ECB and European nations would like to see the EUR get weaker. A strong EUR is doing export economies such as Germany, France, and Italy little good. And economic figures from the continent have also shown that the ‘great recession’ experienced by the major global powers has not exactly been solved.
The U.S. will also release weekly Unemployment Claims today and Pending Home Sales. But investors have come to expect rather unenthusiastic results from the employment and housing quadrants. It is the GDP number that will get plenty of attention.
While the FX markets have shown a stronger USD recently, Gold has in the meantime slipped back into the firm grips of the bears and as of this writing the precious metal is around 1253.00. It also must be noted that equity bourses, and in particular the major U.S. indexes, remain within the realms of lofty aspirations. Meaning that they are traversing record-breaking ranges and dangerous for those without deep pockets. As experienced traders will often say ‘ the trend is your friend’ and it is foolhardy to stand in front of moving trains. Having said Digital Markets Advisor believes volatility will rise in the broad markets.