US GDP Holds the Key

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Market Drivers October 28, 2016
N. Ireland court sides with gov’t
EZ Business Confidence improves
Nikkei 0.63% Dax -0.35%
Oil $49/bbl
Gold $1267/oz.

Europe and Asia:
EZ Business Conf. 106.3 vs. 104.4

North America:
USD GDP 8:30
USD U of M 9:55

It’s been a quiet night Asian and early European session on the final working trading day of the week with the exception of cable which was rocked once again with Brexit news.

The high court in Northern Ireland stood aside on ruling about the EU referendum stating that, “High policy matters are not justiciable – court views the issue of triggering article 50 as fitting this classification and not subject to judicial review.” The court ruling clears the way for the UK government to proceed with their plans, although it faces further challenges in the British courts before the legal objections can be fully dismissed.

The news sent cable tumbling below the 1.2150 mark but it held support at the 1.2100 level so far although it continues to be pressured. The single currency is grossly oversold, but the political continues to be bleak with seemingly little prospect of any compromise of the Brexit issue and until the market sees a spark of good news any rally is likely to be short lived.

Meanwhile in US today the full focus will be on the GDP data with market expecting a strong rebound to 2.5% from 1.4% the month prior. Some analysts are looking for an even bigger bump up to 2.9% spurred on by consumer spending and capital expenditures and if the number does indeed beat it could certainly spur a rally in USDJPY up to 105.50 and possible even 106.00 as the odds of Fed rate hike in December will almost certainly be assured.

However, given the weakness in consumer sentiment and the fact that Retail Sales missed their forecasts two out of the past 3 months, chance are good that the GDP number may miss. A slight miss may not affect the USDJPY pair much, but if the data prints closer to 2.0% than 2.5% we could see a massive unwind of this week’s rally as fresh doubts about Fed policy will creep into the marker.

Boris Schlossberg
Managing Director

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