Stagflation fears increase
A lower than expected US GDP growth rate (3.1%, Exp: 3.4%, Pre: 3.8%) confirming the slow growth and inflationary fears, caused ripples in the stock and bond markets – the former (Dow and S&P) losing by 1% and the Treasuries gaining by 4 to 5% across tenors.
The US Dollar, however, with expectations of a rate rise, maintained its strength against major crosses. GDP Price Deflator, shooting up to record high (3.5%, Exp: 2.0%, Pre: 2.3%) added to the inflation talks.
The reaction to GDP data was limited because of the ambiguity and misinterpretation, as the weakness in growth came primarily from inventories and not consumer spending. Consumer spending has seen a fall in last readings due to oil prices, but not as much as market expected. The markets are expected to remain choppy for couple of more days, with market eying the FOMC meeting on May 3.
US Treasuries were seen down in US session on inflation concern. midst fears of slowing growth, once again prompted by poor durable goods orders (actual: -2.8%, exp: 0.3%, prev: -0.2%), greenback managed to sustain its strength. The initial spurt in treasury prices subsided with a rather lukewarm reception of 2-year Treasury auction. The 10-year Treasury ended at 4.24% (previous 4.28%). The market is now eying the most awaited GDP and Chain Deflator data to be released today. Despite occasional fears, GDP growth expectations are maintained at 3.5% with previous being 3.8%. Chain deflator is also expected to reduce to 2.1% from previous figure of 2.3%.
GDP and deflator data are expected to give some bruises to dollar again, with major crosses expected to gain.
Outlook for the day
EUR/USD - With Euro zone business confidence expected to show poor readings, Euro is expected trade in 1.2880 – 1.2940 range and end the week on a lower tone.
GBP/USD - Cable is showing strong independence to data in last couple of weeks, with the range being 1.9060 – 1.9140. It clearly seems to be a wait and watch position with market awaiting a major break through on either side.
USD/JPY - Technically Yen looks weak, with current range being 105.60 – 106.40 and marching towards 107.00 in near future.
The US Dollar, however, with expectations of a rate rise, maintained its strength against major crosses. GDP Price Deflator, shooting up to record high (3.5%, Exp: 2.0%, Pre: 2.3%) added to the inflation talks.
The reaction to GDP data was limited because of the ambiguity and misinterpretation, as the weakness in growth came primarily from inventories and not consumer spending. Consumer spending has seen a fall in last readings due to oil prices, but not as much as market expected. The markets are expected to remain choppy for couple of more days, with market eying the FOMC meeting on May 3.
US Treasuries were seen down in US session on inflation concern. midst fears of slowing growth, once again prompted by poor durable goods orders (actual: -2.8%, exp: 0.3%, prev: -0.2%), greenback managed to sustain its strength. The initial spurt in treasury prices subsided with a rather lukewarm reception of 2-year Treasury auction. The 10-year Treasury ended at 4.24% (previous 4.28%). The market is now eying the most awaited GDP and Chain Deflator data to be released today. Despite occasional fears, GDP growth expectations are maintained at 3.5% with previous being 3.8%. Chain deflator is also expected to reduce to 2.1% from previous figure of 2.3%.
GDP and deflator data are expected to give some bruises to dollar again, with major crosses expected to gain.
Outlook for the day
EUR/USD - With Euro zone business confidence expected to show poor readings, Euro is expected trade in 1.2880 – 1.2940 range and end the week on a lower tone.
GBP/USD - Cable is showing strong independence to data in last couple of weeks, with the range being 1.9060 – 1.9140. It clearly seems to be a wait and watch position with market awaiting a major break through on either side.
USD/JPY - Technically Yen looks weak, with current range being 105.60 – 106.40 and marching towards 107.00 in near future.
posted by Drs Search @ 11:18 AM
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