The weekly unemployment claims data came in higher than expected when released in the USA on Thursday; jobless claims were at 259k for the week, versus expectations of 235k. New home sales in the USA also missed the consensus prediction; the reading came in at 536k, a fall of 10.4% from the previous November figure. And at -$65bn, the monthly trade balance of goods for the USA; the difference between imports and exports, came in marginally worse than the economists’ polled anticipated.
The good news for the USA economy came in the form of the latest Markit services data, printing at 55.1, just ahead of the prediction. None of the misses effected the main equity markets in the USA, with the DJIA closing at a new record high of 20,100 and the SPX closing down a marginal 0.07%, with the Nasdaq down 0.02%. However, the surprise elevation in the weekly claims number and the alarming slump of new home sales, adds to the doubts expressed by many analysts and market commentators, many believe that the USA economy has peaked. Especially considering the rise in equity markets during recent years is as a result of share buy backs; corporates buying back their shares with finance at advantageous rates, as opposed to engineering any genuine growth. According to recent data, up to 95% of the capital borrowed by the top 100 companies in the USA, was used to engage in share buy back schemes.
The UK’s economy is still yet to reveal any serious after effects as a consequence of the referendum decision in June and whilst many analysts are becoming tired of stating the obvious, it’s worth repeating; “the U.K. hasn’t left yet”. The GDP data published on Thursday revealed that the UK’s economy grew by 2.2% in 2016. However, there could be storms brewing and a maelstrom building up on the horizon, for such an unbalanced consumer driven economy and society. The CBI “retailing reported sales” data for January came in at -8, versus expectations of 27, once again indicating just how precarious the UK’s economy is and why prime minister May will have to charm and or beg president Trump for spectacular trade deals during her visit to the USA on Friday. The CBI data had little effect on the FTSE 100, which closed down 0.04% on the day.
The Dollar Spot Index added 0.4% on Thursday, improving from a 0.4% decline on Wednesday. The index is headed for a fifth straight weekly decline, after rising to the highest in more than a decade.
GBP/USD weakened by 0.3% to 1.2595, after earlier in the day climbing by 0.3% after the GDP data release. That still leaves sterling on course for its best fortnightly performance versus the dollar in ten months. The euro slid by 0.6% to 1.0678. EUR/GBP reached a three-week low of 84.71, before easing back to trade flat on the day at 85.03. Yen experienced a sell off on Thursday versus its major peers, whilst the Swissie rallied. USD/JPY finished the day at circa 114.58, whilst EUR/CHF slumped to 1.0679.
Gold futures fell by circa 0.8% to settle at $1,188 an ounce in New York. It was the third straight loss and the longest slump seen since Dec. 22nd. The precious metal fell to $1,186.60 at one point, the lowest for a contract since Jan. 11th. West Texas Intermediate crude rose by circa 2% on Thursday, to settle at $53.06 a barrel, the highest level printed in almost three weeks, as optimism increased that OPEC and the other major producing nations, would stick to their output cut quotas.
Economic calendar events for Friday January 27th, all times quoted are London times
13:30, currency effected USD. Gross Domestic Product (annualised) (4Q). The expectation is for the annual GDP to come in at 2.2%, from 3.5% previously. Any miss to the downside could effect the dollar’s value and USA equity markets.
13:30, currency effected USD. Durable Goods Orders (DEC). It’s anticipated that there’ll be a reversion to positive data with a prediction of 2.6%, from the shock fall of -4.5% recorded for November. The amount of durable goods ordered by USA consumers is a good leading indicator as to the overall confidence in the retail economy and just how much disposable income consumers have at their disposal and, for example, how willing they are to upgrade many of their domestic machines.
15:00, currency effected USD. U. of Michigan Confidence (JAN). A well respected confidence survey, with the estimate of no change, from the 98.1 recorded in December.
18:00, currency effected USD. Baker Hughes U.S. Rig Count (JAN 27). The previous rig count was 694, any major change on this could cause the price of oil and therefore the dollar, to quickly alter in value.