US GDP reinforces a Fed hike is not far away, US dollar only marginally stronger

Quick Recap

Stocks went nowhere in the US last night even after Q2 GDP showed the economy was growing at 2.3% annualised pace and jobless claims continued their relentless advance. Europe did better, however, with every index I watch, except the IBEX climbing. That’s left SPI 200 September futures up 10 points this morning after the strong 0.81% gains on the physical market yesterday.

While stocks in the US didn’t appear to react to the GDP, the US dollar certainly did and the dollar index is up 0.5% this morning. That put downward pressure on the euro, Aussie, Kiwi and yen. Short term US rates rose as well, with the US 2-year up 4 points to 0.75%. Long bonds rallied, however.

On commodities, Nymex crude fell back, as did copper and other base metals. Gold tumbled as well and iron ore was off more than 1%.

I’m cheating a bit this morning because I am a little late – that’s what I wrote at Business Insider this morning.

The key thing I want to draw out for traders though is that US GDP now back at  2.3% annualised and Q1’s contraction in growth of 0.2%  revised away to a 0.6% increase the economy is looking okay. Crucially GDP growth and the very solid fall in jobless cliams are completely incompaible with szero-percent interest rates.

The overnight scoreboard (9.11am AEST):

• Dow Jones -0.03% to 17,745
• Nasdaqup +0.33% to 5,128
• S&P 500 flat 2,108
• London (FTSE 100)+0.57% to 6,668
• Frankfurt (DAX) +0.4% to 11,257
• Tokyo (Nikkei) +1.08% to 20,522
• Shanghai (composite) -2.2% to 3,705
• Hong Kong (Hang Seng) -0.49% to 24,497
• ASX Futures overnight (SPI September) +10 to 5,623
• AUDUSD: 0.7290
• EURUSD: 1.0933
• USDJPY: 124.14
• GBPUSD: 1.5596
• USDCAD: 1.3004
• Crude: $48.55
• Gold: $1,088
• Dalian Iron Ore (September): 399

On the day

On the data front today, we get PPI and private sector credit in Australia, CPI in Japan and then retail sales in Germany tonight. We also get EU CPI tonight and in the US, the Employment Cost Index will be more closely watched than usual.

CHART OF THE DAY: EURO

Whether it’s Euro or Dollar Index (in many ways the invesrse of this chart) what is clear this week is that we have had a failed break.

Longer term that makes the recent low at 1.0795/1.08 as super important. A break would be decisive.

Yesterday “US Oil – It looks like the low might be in for this run. We could see a $1.50 run higher toward my fast moving average at $50.50.” Last nights reversal doesn’t negate the push higher.