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US GDP Data Disappoints; Markets Take Profits

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The US economy unexpectedly shrank last quarter. GDP figures came in at -0.1% versus expectations for a 1.1% gain. Most analysts consider this a one-off event as US defense spending contracted significantly as the US pulls out of Iraq and Afghanistan. Traders booked profits on the news, but it’s not a trend changing event. The bull market is still in tact as the Fed continues with its bond buying program. ADP reported that employers added 192,000 jobs last quarter.

Euro Breaks Through 1.35

The Fed’s policy of buying bonds continues to weaken the dollar against the euro. The euro is currently trading at 1.3554 to the US dollar, down 12 pips. There is relative optimism that the euro zone is coming out of recession and analysts are getting bullish on the euro currency. The next target for some strategists is 1.37-1.38. The US and Japan continue to tighten monetary policy while the Euro zone doesn’t appear to be cutting interest rates any time soon. As the euro zone has stabilized, look for capital to return to the euro zone that had previously left during the crisis. The yen has been even weaker than the US dollar against the euro. The euro hit a high of 123.87 yen yesterday, a level not seen since May 2010.

Commodities Rally On The Back Of Fed Easing

Commodities rose after a weak GDP reading supported the Fed’s continued asset purchases. The US economy is recovering, but still weak enough for the Fed to continue to pump money. The positive data out of Europe supported the global commodity story.

Crude oil is trading at $97.79, gold $1677.60, silver $32.06, copper $3.7510 and corn $7.44 a bushel. Fed policy is very supportive of commodity prices as the US dollar weakens. Most commodities are priced in dollars and a weaker dollar pushes commodity prices higher to make up for the weaker dollar.

Facebook Stock Down In After Hours Trading

Facebook is down $1.07 to $30.17 after the social media company reported a drop in profits on the back of higher spending. The company is seeking to get an edge up on rivals such as Google. If the company can translate the higher spending into higher revenues, the stock should continue higher.

Economic Calendar

  • 0855 German Unemployment Rate 6.9% forecast 6.9% prev (Euro)
  • 0855 German Unemployment Change 8k forecast 3k prev (Euro)
  • 1300 German CPI (MoM) -0.4% forecast 0.9% prev (Euro)
  • 1300 German CPI (YoY) 2.0% forecast 2.1% prev (Euro)
  • 1330 US Core PCE Price Index (MoM) 0.1% forecast 0.0% prev (USD)
  • 1330 US Personal Spending (MoM) 0.3% forecast 0.4% prev (USD)
  • 1330 US Personal Income (MoM) 0.8% forecast 0.6% prev (USD)
  • 1330 US Initial Jobless Claims 350k forecast 330k prev (USD)
  • 1330 US Employment Cost Index (QoQ) 0.5% forecast 0.4% prev (USD)
  • 1330 Canadian GDP (MoM) 0.2% forecast 0.1% prev (CAD)
  • 1445 Chicago PMI 50.5 forecast 50.0 prev (USD)
  • 2330 Japan Unemployment Rate 4.1% forecast 4.1% prev (JPY)
  • 2330 Japan Household Spending (YoY) -0.3% forecast 0.2% prev (JPY)

As always be sure to check back for the latest updates. Remember several markets will be affected by the above data items. Look at several markets and trade the market with the most volatility. Good luck to all binary traders!