Morning Commentary: Sliding into the Weekend

Foreign Exchange - Morning Commentary
Sliding into the Weekend
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David Atkinson
David Atkinson
Foreign Exchange Sales Manager
As we come to the end of a very eventful week, U.S. equities are opening down once again after taking a respite from the bleeding yesterday.  The Dow Jones Industrial Average opened down 1.2 percent with the S&P 500 off 1.8 percent.  The NASDAQ opened down 3 percent, reflecting the very disappointing earnings releases yesterday from Amazon and Alphabet.  Expect an active day on Wall Street.

The most-watched GDP report in months came out at 8:30 AM EDT.  Markets were looking for 3.3% U.S. growth in the third quarter.  The actual number came in at 3.5%, mostly due to increased consumption.  Frankly, the number has good and not as good aspects to it.  While the all-important consumer remains healthy, there was only modest increases in business fixed investment and construction.  There was also an expected boost in inventories in an effort to ship goods into the country ahead of more tariffs. 

The U.S. dollar is broadly firmer, though mildly so.  The biggest losers are the commodity currencies of Australian, Canadian and New Zealand dollars, reflecting a broader risk-off sentiment in the global markets.  The loser for the week looks to be the British pound, which is down over 2%, as I write, on the usual Brexit concerns.  The euro is down almost 1.4% so far this week on the concerns about Italy's budget situation, which is the topic of this week's Global Perspectives.  We will get more news on that today as S&P will rate the country's debt; this will be something to compare with last week's downgrade by Moody's.
  • The Chinese renminbi traded precariously close to the 7.00 level, trading just above 6.9650 at one point.  Deputy Governor Pan Gongshen of the People's Bank of China cautioned markets that bond financing for real estate companies and sectors that are overcapacity will be restricted.  If you think all the way back to the beginning of this week – which seems like a LONG time ago at this point – Chinese equities were up 4% on supportive words from the government.  China looks to be moderating that view.
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