The winter’s final backlash

Forecasts for the second estimate of the U.S. Q1 Gross Domestic Product, released last Thursday, were not excessively optimistic. The preliminary estimate for the figure, released on April 30th, saw the U.S. economy expand by an annualized 0.1% during the quarter. However, as the effect of bad weather settled in analysts’ economic models, it dragged their estimation for the second print to a contraction of 0.5%. When the second estimate’s data was actually published, it presented an annualized 1% decrease of GDP. The recent datum marked the first quarter in three years in which the U.S. economy presents a contraction. Surprisingly, the effect the bad news had on the markets was somewhat limited. Expectations of the Fed prolonging its aggressive monetary activity were not evident in the U.S. bond yields, as the 10 year presented little change immediately after the publishing. U.S. equity Markets also exhibited with a rather muted reaction with the NASDAQ clearing the day at a 0.5% gain, and the Dow Jones adding 0.4%. Join Anyoption and take advantage of the volatility of the markets ..Start Trading TODAY!

On both sides of the Atlantic

Register at ANYOPTION and start trading TODAY!

Wednesday sported an opportunity for U.S. data to shake the markets. Initially, the ADP employment change was released, and presented a very impressive increase of 215,000 jobs in the U.S. economy during November. When the promising data started advocating the tapering of QE3, it also sent the USD to strengthen nearly 0.5% versus the EUR. However, the day did not stop there, as the ISM Non-Manufacturing Composite Index was released shortly after, with less appeasing results. The negative 53.9 figure dispersed some of the QE3 tapering concerns, weakening the USD back to the 1.36 levels versus the EUR, where it started at. Equity reiterated their example for the “Bad news is good for stocks” paradigm, as the S&P500 gained approximately 0.7%.

Thursday saw a rather expected decision by the Bank of England to keep the official bank rate at 0.5%. The day’s protagonist, on the other hand, is probably the Department of Labor’s Initial Jobless Claims report, which indicated only 298,000 Initial Claims were submitted during the previous week. The last time this occurred was September and the figure has since surged to as high as 737,000, due to the Government’s shutdown. However, it seems that optimism regarding the labor data was already priced in the markets, as a result of the previous day’s positive ADP figure. Evidently, markets saw little change following the print.

Friday was somewhat of a different story. The day started with very positive indications regarding the U.S. labor market. These included U.S. Nonfarm Payrolls adding 203,000 Jobs in November, and perhaps more importantly U.S. Unemployment dropping to a level of 7.0%. Stock derivatives’ immediate response was to lose about 0.5%. Taper-induced trading was also evident in gold which took quite a blow and of course the USD which strengthened by almost 0.3% versus the EUR. Interestingly, things did not stop there - when the official trading started market opening was on average a tad higher than the previous day’s close. However, soon after that euphoria spread around equity markets, which lead both the Dow and S&P 500 to close their trading days more than a percentage point higher than the previous day’s close. 

Register at ANYOPTION and start trading TODAY!

When rumors appear brighter than the news

Register at ANYOPTION and start trading TODAY!

EUR/USD trading last week was subject to breaking events from both sides of the Atlantic. New York Fed President Dudley, who is considered a member of the dovish set among FOMC members, expressed his hope that the U.S. economy had reached a turning point, hopefully leading to more substantial improvement in labor market conditions. Such thinking among FOMC doves was not evident in previous FOMC discussions. However, Dudley’s words did not convince markets of an imminent taper, as the USD traded mixed to lower against most major currencies.
Most of the weekly drama revolving the Euro was rumor-based. Rumors started surfacing on Wednesday and suggested that the ECB is considering a lower of deposit rates from what currently is zero to a negative -0.1%. The ECB did not confirm any of it, yet the rumor sufficed to see the EUR/USD immediately losing close to a cent. The rest of the day saw the release of the Fed’s October minutes. However, it is advocating the idea that advances in the job market would lead to tapering was already priced in the markets as those saw little change.
On Thursday, the EUR/USD has retracted from the previous day’s drop, as ECB President Mario Draghi attempted to slow down the rumor mill. At a speech in Berlin, when explaining what led the ECB to cut its main policy rates two weeks before, Draghi asked that the audience will not try to infer from his words on the possibility of negative rates on the deposit facility. Draghi added: “As I said in the press conference this was discussed in the last monetary policy meeting, and there are no news since then… because people tend to put things together and create their own dreams". 

Register at ANYOPTION and start trading TODAY!