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.

Growth wobbles create worries

Amidst fears of slowing growth, once again prompted by poor durable goods orders (actual: -2.8%, expected : 0.3%, previous: -0.2%), the 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 - Euro is seen gaining on GDP expectations and will move in the range of 1.2900 – 1.3020.
GBP/USD - Cable, holding the crucial 1.9000 level and tracking the dollar weakness, will trade in the range of 1.9000 – 1.9110.
USD/JPY - Despite constant flow of bad Japanese data, Yen sustained its marginal gains and is expected to trade in the range of 105.50 – 106.30.

euro slips on growth news

With US Existing Home Sales at 6.89 Mn (Previous:6.82 Mn), and New Home Sales at 1431K (Previous:1275K) reported to have grown at their fastest rate in the last 11 years – there are no longer any doubts that US growth rate is sustained and that there is no slowing down.
The market completely shrugged off a drop of 5.3 points in Consumer Confidence and the US dollar rally against major crosses took up once again.
But consumer confidence is still a key area of concern as this is the third consecutive drop in the numbers.
With interest rate differentials of USD and the euro widening, the market is taking further bullish clue on dollar. Durable goods orders expected today may put in some pressure on dollar exchange rates.

Outlook for the day

EUR/USD - With a weaker bias in Euro on positive US data yesterday, it is expected to move in the range of 1.2940-1.3020, testing strong support at 1.2940.
GBP/USD - With break out of psychological level of 1.9100, cable is expected to test support at 1.9010, 1.9110 being the resistance.
USD / JPY - Yen, losing ground against dollar on strong data from US, is expected to move in 105.75 – 106.80 range.

China denies Yuan revaluation

With Chinese currency officials denying revaluing Yuan peg in 2005, the markets have started taking a clue for Asian currencies from it, with Yen already trading at a 1-month high.
With the week full of Japanese and European data the US Dollar may try to recover on any negative sentiment. Markets are expected to be jittery with both side movements during the week.

Outlook for the day

EUR/USD - With Euro losing on technical selling against the Dollar, the range is expected to be 1.2975 - 1.3120.
GBP/USD - Cable is also losing ground against the dollar in early Asian trade, and is expected to move in 1.9060 - 1.9220 range.
USD/JPY - Yen’s gain on Chinese Revaluation talks is expected to last for the day with the range being 105.20 - 106.20.