US economy in a technical recession.
Euro-Zone industrial sentiment dipped to 3.5 for July from 7.0 previously while the services-sector index retreated to 10.7 from 14.1 in June. Consumer confidence was also confirmed as weaker on the month with the overall business and consumer survey sliding to 99.0 from 103.5. This was below expectations of 102.0 and the weakest reading since March 2021.
According to the flash data, second-quarter annualised GDP data was reported at -0.9% compared with expectations of a 0.5% increase and followed a 1.6% contraction for the first quarter.
There was a small increase in consumer spending for the quarter despite dip in spending of durable goods. GDP was undermined by another sharp dip in inventories while net exports did secure a net advance for the quarter.
Technically, the US economy was, therefore, in recession for the first half of the year, although the data will inevitably be revised.
Following the GDP data, market expectations over a possible 75 basis-point rate hike in September continued to fade and yields moved lower across the curve.
The 10-year yield declined to 3-month lows below 2.70% with a retreat to near 2.65% on Friday.
Although the dollar rallied into the New York open, lower yields were a significant factor undermining the dollar again after the US GDP data.
Gains in equities also undermined defensive support for the US currency with the dollar index retreating to fresh 3-week lows.
USD/JPY slumped to 6-week lows below 133.00.
Wall Street indices also rallied further on Thursday as the GDP data fuelled hopes of a slightly less aggressive Fed stance on interest rates.
Global bourses, however, struggled to take advantage of US gains.
There will be potentially choppy trading on Friday with month-end position adjustment adding to volatility.
Most investment banks suggest that the dollar will be vulnerable to some selling pressure.
The Euro came under heavy pressure after Thursday’s European open with further concerns over the Euro-Zone outlook. Fears over gas prices and supply vulnerability continued to undermine sentiment. EUR/USD dipped to lows at 1.0115 around the New York open.
US initial jobless claims came in at 253,000 from a revised 261,000 previously. The dollar dipped after the weaker than expected GDP data. Lower yields triggered sharp losses against the yen.
USD/JPY posted sharp losses to 6-week lows around 132.80.
The Swiss franc gained fresh support as the National Bank noted it can adjust policy between meetings. EUR/CHF posted a fresh 7-year low close to 0.9700 before a slight recovery.
Sterling was again broadly resilient, especially with solid global risk conditions providing support. GBP/USD found support just above 1.2100 and again challenged 1.2200 on Friday. GBP/EUR rallied to 3-month highs just above 1.1975 before a limited pullback.
Commodity currencies recovered from intra-day losses on Thursday as the dollar retreated. AUD/USD again challenged the 0.7000 level on Friday and traded just above this level. USD/CAD was unable to hold below 1.2800 and traded just above this level.
|07:30||CHF Retail Sales (Y/Y)(JUN)||-1.60%|
|07:45||France - Consumer Spending MM(JUN)||0.70%|
|07:45||France - GDP Detailed QQ||0.30%||-0.20%|
|08:00||CHF KOF Leading Indicator(JUL)||96.9|
|08:55||German Unemployment Change(M/M)(JUL)||133K|
|08:55||German Unemployment Rate(M/M)(JUL)||5.00%||5.30%|
|09:00||Italy - GDP (Y/Y)||6.20%|
|09:00||Italy - GDP (Q/Q)||-0.20%||0.10%|
|13:30||USD PCE Core Price Index (Y/Y)(JUN)||4.80%||4.70%|
|13:30||USD PCE Core Price Index(M/M)(JUN)||0.50%||0.30%|
|13:30||Employment Cost Index||1.10%||1.40%|
|13:30||USD Personal Spending (M/M)(JUN)||0.90%||0.20%|
|13:30||CAD GDP (M/M)(JUN)||0.30%||0.30%|
|14:45||USD Chicago PMI(JUL)||56|