Stocks in the US failed to hold to gains and finished in the negative side with losses of around 1% on a day that markets listened first to Jean-Claude Trichet and then to Ben Bernanke; but the calendar still has one more key speaker: Barack Obama, that will announce a proposition to boost the economy.
Bernanke maintain the tone of the last speech and did not signal what the Fed would do in the next FOMC meeting, when the Fed could announce more monetary stimulus. C. Evans, a voting member asked for more action from the Fed while other participants remain caution about what to do. September 21 will be a key day for investors, as the Fed is set to release its decision on monetary policy.
Economic news on Thursday were mix. The trade deficit widened as export rose and imports decline. “Analysts are probably increasing their third-quarter GDP growth estimates somewhat on the back of today’s trade numbers; our current forecast calls for real GDP to rise at an annualized rate of 1.8 percent in the third quarter,” Jay Bryson and Ed Kashmarek from Wells Fargo wrote in a report of the trade balance data.
Jobless claims offset trade data as claims rose unexpectedly and remain above 400K. “This level is important because when claims are below 400K its consistent with the economy adding enough jobs to meet the demand of new entrants into the labor force – around 150K,” said Nick Nasad, fundamental analyst at FXtimes.com. He pointed out that stagnant gains in the labor market will mean consumers are reticent to go out and spend their money, “which means they will be prudent with their purchases, which will keep the economy going at only a modest pace in the 2nd half of the year.”
Fears of a global slowdown continue. On Thursday Trichet mentioned that they see, at the ECB, more downside risks for the economy that the previous months. In a few hours, Obama will deliver a key speech introducing proposals to stimulate the economy.
Dollar up, Swissy down
In the currency market the Dollar rose across the board while the Swiss Franc remained under pressure and tumbled once again. The Pound rose considerably in the market as the EUR/GBP tumbled from 0.8820 to 0.8700.
The EUR/USD is about to post the lowest daily close since March. The Euro weakened in the market and lost upside momentum. It could remain under pressure as the EUR/USD holds below 1.40.
Commodity currencies reversed in the second half of the American session and erased gains to finish the session near daily lows, affected by the decline in stocks and also by a stronger US Dollar.