USD, EUR: Backwards or forwards – Commerzbank

Thursday was a bit puzzling. Due to concerns about the current state of the US consumer and general uncertainty about the state of the global manufacturing sector, uncertainty had spread to the currency markets in recent days, Commerzbank FX strategist Volkmar Baur notes.

US GDP figure turns the market upside-down

“The JPY and CHF were in demand, while the EM currencies were less so. And then everything took a turn at 2:30 p.m. (MEST) when the US GDP figures were released. It is generally assumed that markets look ahead and price in expectations, and then a backward looking number causes a reversal. Admittedly, consumer spending came in slightly above expectations at 2.3%.”

“However, it should also be noted that the positive surprise in overall GDP growth (2.8% vs. 2.0% expected) was nearly entirely due to inventory accumulation, which added 0.8 percentage points to growth. Anyway, yesterday was enough to change the mood of the market. However, in my opinion, caution is certainly required.”

“Yesterday's figures did not really put an end to concerns about the US consumer and the manufacturing sector. And next week, we have a number of data points on the calendar (US payrolls, global manufacturing PMIs, just to name the most important) that could rekindle these concerns.”