Intraday Market Thoughts

US Consumer Weighs on Growth Revision

by Ashraf Laidi
Dec 22, 2011 13:23

US jobless claims hit fresh 3-year lows at 364K, final US Q3 GDP revised down to 1.8% from 2.0% partly due to personal consumption revision to 7% from 2.3%. UK final GDP revised higher q/q; UK current account deficit at record highs; French downgrade rumor reappears again. Market turns to final Q3 GDP, UOM consumer sentiment, leading indicators and house price index.

USD is mixed in the ongoing session. It is weaker against AUD, NZD and CAD. Relative strength winner is AUD. European equities are higher by 1% to 1.4%.

Riskier assets were higher across the board when the rumor about French downgrade reappeared yet again. Markets quickly sold off but were able to recover.

Italian PM and finance minister Mario Monti called for the senate to approve the budget today. He said that passing of the austerity measures means Italy can face the crisis but warns that the situation is still critical.

UK final Q3 GDP was revised higher to 0.6% from 0.5% q/q and remained unrevised at 0.5% y/y. However, Q2 growth was lowered to 0% from 0.1% q/q. Any improvement in sentiment towards the GBP is likely to be negated by current account deficit that widened considerably in Q3 to the highest level on record to GBP 15.2 bln from GBP 7.4 bln. Current account as a proportion to GDP reached 20+ year high. Considering that most analysts predict zero or close to zero growth in Q4, the Q3 revision higher is likely to be quickly forgotten. GBPUSD trades back below 1.57 nevertheless above 1.5650 support.

CHF continues to fall further, albeit at a slow pace, as Swiss finance minister examines further measures to weaken the Franc. However, Swiss parliament has rejected motions that would allow negative interest rates. EURCHF trades around 1.2230, not far from a session highs.

US final Q3 GDP was revised down to 1.8% from 2.0% partly due to personal consumption revision to 7% from 2.3%. US jobless claims hit fresh 3-year lows at 364K. The news is helping stocks to push up further, alongside a boost to oil prices.

The final December university of Michigan consumer sentiment due at 9:55 am ET should see and increase to 68 from initial 67.7.

November leading indicators are seen lower at 0.3% from previous 0.9% and October house price index is expected to decline to 0.2% from 0.9%. Both indicators are due at 10:00 am.

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