Expect Friday’s trading to be relatively quiet in as far as the greenback is concerned, especially in comparison to Thursday’s action. Having said this, a couple of medium impact fundamental releases may serve to compound yesterday’s GDP and initial claims data, and offer up something of a medium term bias. Personal spending and Chicago PMI are set for release at market opan and mid-morning respectively, and a miss in either would add to Thursday’s damp GDP release and put pressure on the USD versus its major counterparts. Conversely, better than expected data could add to the initial jobless claims surprise and strengthen the greenback. Watch the data and trade accordingly.
The Canadian dollar is unlikely to have a quiet end to the week, with the much anticipated GDP figure slated for release as the US markets open. Consensus forecasts MoM growth of 0.1%, which would represent an outpacing of the latest US growth figures – so look for anything above this (or even an on target release) to add strength to the Canadian dollar. Looking slightly longer term markets expect the outpacing of the US markets to wane over the coming quarters, so bear in mind that any bullish bias in the Canadian crosses would only like me a short term.
Japanese national inflation data released yesterday came in better than expected, but failed to have any meaningful impact in the value of the yen versus its major counterparts. The reasoning behind the dampened impact was that the more focussed Tokyo release missed expectations, as did the highly anticipated, and perhaps more important, household spending figure. Analysts are increasingly concerned that stagflation could be just around the corner – and declining consumer spending (combined with rising inflation) points towards the validation of that concern. Expect yen weakness as we head into the weekend.
European markets are down slightly on Friday morning as a spate of relatively low impact releases put pressure on the economic zone’s major indices. Italian and Spanish PPI data missed expectations considerably, so expect the IBEX 35 and the Borsa to lose strength as Friday matures. the only market up in the European mainland is the DAX30, boosted by better than expected YoY retail sales data. Expect US markets to remain relatively stagnant pre-market, and direct any intraday trade based upon the bias offered up by the personal spending and Chicago PMI data.
Crude oil is down on Friday morning having returned some of Thursday’s gains on a short term correction. Traders will be looking to the upcoming US data to help determine a medium term bias for the fuel – if the data beats expectations it will hint at future economic growth, which in turn, will boost the price of crude oil on Friday.
Gold has once again opened the day down on Friday – largely due to the current risk on sentiment that seems to have engulfed the markets. US initial jobless claims came in better than expected on Thursday, fuelling a late day market rally across the major US indices. This shift in capital led to a decline in gold, so look to today’s personal spending and PMI releases to inject a similar bias into the equities market, and in turn, more gold weakness heading into the weekend.
South African Rand
At US market open, the South African Revenue Service will report its latest trade balance data. There has been grave concern in South Africa as late, not just because of the impact the ongoing strikes might have on output but also that a potential shift to risk off sentiment might cause a capital outflow and quickly tighten up the credit market. For this reason, look for weak export data (as is expected) to weaken the Rand against the dollar.