Risk-off as EU data sours
All eyes on US GDP
Nikkei -0.26% Dax -2.20%
UST 10Y 0.56
Oil $40
Gold $1954/oz
BTCUSD $10983

Asia and the EU
EU GDP -11.7% vs. -10.9%

North America Open
US GDP 8:30

It’s been a decidedly risk-off trade in Asian and European session today with equities off by nearly 100 basis points ahead of US GDP data.

Yesterday, Fed Chair, Powell’s presser offered little fresh news, but the very fact that he offered no new stimulus measures may have had a dent on risk with EURUSD also seeing some selling after peaking out at the 1.1800 figure yesterday.

The eco front today EU GDP came in worse than even expected with year over year figure printing at -11.7% versus -10.9% eyed. The figure wiped a decade of growth from the region, as almost every country in the EU came to a standstill in Q2 battling COVID.

On the bright side, German unemployment improved with unemployed actually declining by -18K versus a forecast of 44K rise. The news suggests that Europe’s largest economy has stabilized and the slow turn towards growth is taking shape as we head into the second half of the year.

Unemployment will be a key focus for North American traders as markets look at the weekly jobless claims to make sure that the numbers do not rise materially. The bounceback in the US recovery has clearly hit a headwind as many key Southern states have had to scale back their re-openings due to fresh outbreaks of virus. More importantly, US consumer behavior may have retrenched due to revived fears of infection and all of that may have had an impact on labor demand.

In addition to jobs, the market will also see US Q2 GDP data which is expected to print at a whopping -34.1% for the quarter. Although the numbers are clearly backward-looking they may have still have an impact on trade if they prove to be worse than anticipated as the gaping hole in growth left by COVID lockdowns may be much harder to fill than the current market expectation, providing fresh reasons for bears to push equities lower as the day proceeds.