Market Overview

USD grows on high GDP expectations

The single currency is traded near weekly lows against the dollar, getting under pressure after maintaining the soft tone of the ECB during the regular meeting. The EURUSD sank to 1.1640 on Thursday, losing about 0.9% after Draghi’s speech. The acceleration of the inflation and the promise to keep the rates unchanged reduce the real (minus inflation) return on investment to European assets. Such softness of the ECB’s position caused a new wave of pressure on the common currency and European bonds.

Trading on the stock markets on Friday is very calm, the markets show mixed dynamics near the opening levels.

Oil continues its recovery and trades around $75 for Brent. The reason for the growth is the restriction of Saudi Arabia’s oil shipment across the Red Sea after its two tankers had been attacked.

The futures for S&P500 has added 0.1% since the beginning of Friday. For July, it grew by more than 5% and now is only 1% below the historical peaks achieved in January this year. Then the markets had an impressive bull run as the economy significantly surpassed the expectations. Many economic indicators in the United States remained at a high level, but the expectations increased.

The main event for today will be the first US GDP estimate for the 2nd quarter. This figure is expected to exceed 4%, which will be the highest value in almost 4 years. These are very high expectations of the market. Since the beginning of the year the index of economic surprises in the U.S. (the difference between the expectations and the fact) has declined significantly and approached to the zero mark. This may have a negative impact on the dynamics of the market, which often moves at the expense of such a difference between expectations and actual numbers.

We are coming into a period when the threats of tariff introduction and the first fruits of realized measures could influence the economic data. At this stage, we are likely to see an increase in the business activity of producers who will rush to buy the goods which are potentially subject to the tariffs influence. We have seen this pattern in the China trade figures this month. However, these indicators can later fall considerably.

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