U.S. Housing Data Set to Drive the Financial Markets this Friday

24.10.14

 U.S. Housing Data Set to Drive the Financial Markets this Friday

Data is once again a little lighter at this end of the trading week, opening up the possibility of seeing profit-taking from the recent price trends. There are no major events lined up for the Asian trading session, with only the Chinese CB leading index up for release. Bear in mind that, while this is based on past economic data, it could dictate business and consumer confidence down the line.

Price action could be more exciting in the London trading session, with a few top-tier releases from the euro zone and the United Kingdom. Germany will print its GfK consumer climate index and possibly show a large decline, based on the recent outcome of the ZEW economic sentiment report. This reading fell to the negative territory, confirming the odds of seeing consecutive quarters of negative growth in the region.

Italian retail sales data is also due but this is not likely to cause huge euro swings. Still, it would be helpful to keep tabs of this release as it would provide clues on region-wide economic performance later on.

The UK is gearing up to release its preliminary GDP report for Q3 and possibly confirm whether or not the Bank of England can afford to start tightening next year or not. Data from the UK has mostly been better than expected from July to September, upping the odds for seeing an upside surprise in the GDP. This is backwards-looking data though, so it might not have much of an impact on pound movement if it simply comes in line with expectations. After all, traders are already focusing on the recent slump in the UK and might ignore the GDP reading.

The second day of the EU Economic Summit is set to take place and possibly keep euro pairs active throughout the trading sessions. As mentioned in the past, commitments to keep growth afloat in the region through economic or fiscal measures could allow the shared currency to stay afloat while the lack of agreement could pave the way for more losses.

In the US, new home sales data is due and a small increase is eyed. This might not do much for US dollar movements though, as the end of the week usually spurs profit-taking among investors. Risk sentiment might also continue to drive financial market movements, as any updates on geopolitical risks or the Ebola outbreak could be crucial in determining risk flows.

There are no event risks set for the weekend, other than the release of the EU bank stress test results. With that, euro traders might be keen to lock in their profits or exit their euro trades early prior to this major release. After all, more weakness in the euro zone banking sector could compound recession fears and lead to more bearishness for the shared currency.

Profit-taking could also be seen among global equities, as the pickup in fear and volatility is leading to short-term price moves. Uncertainty has prevented market trends from taking hold, unlike that of price action in the previous quarter. Apart from that, the upcoming Thanksgiving and Christmas holidays might be enough for most traders to take off early and reduce their exposure on their portfolios.