Sentiment moderately lower ahead of China GDP

The USD was slightly higher as sentiment was only moderately lower today. The buck was strongest against the Aussie after a poor June Australian employment report and ahead of key Chinese data tonight which is expected to show slowing GDP growth in 2Q. EUR/USD experienced a limited rebound to current levels around the 1.22 figure after dipping to fresh 2-year lows just below the 1.2170 level as ECB officials spoke with a dovish tone. The ECB’s Knot said that he does not rule out further rate cuts and Nowotny noted that the growth perspective is worsening all over Europe.

In the U.S., weekly initial jobless claims fell by 26k to 350k from the prior 376k. The decline in claims was 20k below expectations and the previous week’s figure was revised upwards but only slightly by 2k. Import prices for June were also released and showed the largest monthly drop since December 2008 with a print of -2.7% (cons. -1.8%). Despite the better than expected drop in jobless claims, the data is short term in nature and a broader view still shows a disappointing labor market. San Francisco Fed President Williams expressed his concern, saying that the Fed is falling short on both employment and price mandates. He went on to said that it is “essential” for the bank to provide sufficient stimulus and that QE will be the “most effective tool” if more action is needed.

U.S. equities slowly grinded higher after a sharp drop at the open and finished the day only marginally lower. The Dow Jones Industrial Average1 ended the session lower by about -0.24% while the S&P 5001 declined by around -0.49%. Precious metals traded mixed with gold slightly softer while silver is up by +0.82% at time of writing. WTI crude1 is higher for the second consecutive session and is currently higher by about +0.12%.

There is a slew of Chinese data tonight that includes June industrial production, retail sales, and fixed asset investments. The main number traders will be focused on will be the important 2Q GDP figures. The importance of the growth figures are underscored by the speculation on whether or not China is experiencing a ‘hard-landing’ as well as the fact that the country is the world’s second largest economy and thus crucial to the outlook for global demand. The consensus is for a slowdown in GDP growth to 7.7% from the prior 8.1% and a surprise is likely to see high beta currencies (i.e. AUD, NZD) move in the direction of the surprise.

Elsewhere in the Asia/Pacific region, New Zealand will report June non resident bond holdings and Japan is set to release May industrial production and capacity utilization figures.

Source: Forex.com

12.07.2012