UK Q2 GDP likely to be revised down

Today’s awful Q2 UK Business Investment data, down 10.4% q/q and 18% y/y, make it very likely that tomorrow’s Q2 GDP data will be revised downwards, according to this.

IFO,IMF and G7

The IFO institute have announced that their previous forecasts for 2009 and 2010 growth are too pessimistic and that upward revisions are planned. They add that growth of up to 1% is possible in 2010 and that 2009 is likely to be better than -6%. Elsewhere an IMF spokeswoman says that a global economic recovery is in sight and may be a little stronger than expected.  She stresses that the recovery is still likely to be muted and policy supports need to remain in place. Finally a few comments from a G7 source that syas that they do not expect much discussion of the status of the Dollar as a reserve currency at the upcoming G20 meeting, echoing comments made from the Russian Deputy FinMin made a few days ago.

The dollar has lost a bit of ground in the last hour or so, with Eur/Usd now back at 1.4265 after hitting a low at 1.4220 when stocks were at the height of their sell off. Cable has even rallied now above 1.62 as 1.6150/60 support holds once again.

Kansas City Fed Manufacturing survey falls

The Kansas City Fed Manufacturing survey fell to -7 in August from +2 in July. Not the most important survey around to be fair.

Cracks widening in risk on trade

In all of this risk on indigestion the one instrument that hadn’t come to the party was stocks. This afternoon though, they seem to have decided to join the fun. S&P Futures struggled to rally after the GDP data and touched 1030, but since then it has been pretty much one way traffic with the future hitting its lowest level since the Bernanke testimony at 1015. Oil also looks in danger of a deeper sell-off, dipping below $70 after testing $75 only two days ago. In FX its pretty slow going the Yen crosses have come under pressure as stocks fall with selling seen in the 93.90 area.  Cable dipped again into bids at 1.6150/60, but the bounce has been rather poor which doesn’t bode well.

Sterling remains well offered

Cable is coming under pressure again as Stocks slump and the general risk on trade loses momentum. Adding to that is a lot of speculation regarding flows from the possible link up of Diageo and LVMH’s Moet Hennessy, which you can read about here.  Currently at 1.6175, bids are at 1.6150/60, yesterday’s lows.

SNB’s Jordan-SNB does not accept any further appreciation in CHF

For some reason Reuters are running comments from the SNB’s Jordan saying that the SNB does not accept any further appreciation in the Swiss franc, but this is from a interview om July 9th in a swiss magazine. No reaction in Eur/Chf so far, maybe someone at Reuters is long ???

Q2 US GDP was unrevised at -1.0%

Q2 US GDP has been unrevised to still show a reading of down 1.0%. Final sales were revised to up 0.4% from down 0.2%. Jobless claims came in a tad higher at 570k.

I’m a bit surprised again at the lack of positive reaction, which doesn’t bode well. Eur/Usd has fallen back to 1.4250 even though the numbers were better than expected.

German Inflation rises 0.2% m/m, flat y/y

After all the state data indicated a slightly higher than expected outcome for German inflation, the official figures have confirmed that inflation rose 0.2 % in August and was flat y/y. A tad higher than the consensus for a flat reading m/m

Fed’s Lacker says that economic outlook is improving.

Looks like the Fed’s Jeffrey Lacker doesn’t quite agree with his contemporary Lockhart’s low rates for a long time comments from yesterday. Lacker says that while the economic outlook is improving, the recovery is likely to be slow and uneven for some time, but stressed that keeping inflation well contained may require action before a vigourous rebound is established.  He goes on to say that the labor market is the key concern, with weak incomes dampening consumer spending growth.

Eur/Usd continues its rather staedy ascent now at 1.4270. I’ve heard of a few offers in the 1.4300 area, but it seems many market participants have been quite surprised at this bounce, so we may have to squeeze out a few weak shorts.

US Q2 sales component to be keenly watched

Good Afternoon. Another strange morning in the FX world, but the basic themes pretty much remain the same. Speaking as someone who paid Cable right at the top at 1.6246 at 7.00.01 this morning, (thinking that house prices rising at their fastest pace in 2 and half years might be a good thing) I’m as confused as you are.

Focus now shifts to our second look at the US Q2 GDP data, which is expected to be revised downwards to  -1.5% from the original estimate of -1.0%. A lot of people are talking about how the sales component will be key. At the same we get our weekly look at  jobless claims which are expected at 565k after last week’s surprise  rise to 576k.