Traders will be expecting a rebound this morning in European stocks after markets yesterday saw poor earnings and economic data drag the major indices lower. Today will be another session that has a focus on the economic calendar as US GDP this afternoon comes into focus.
Yesterday’s UK GDP figure will still be ringing in the ears of David Cameron this morning, as a stagnant GDP reading showed only a 0.3% return in Q1. The economy is the major weapon the Tories have in their arsenal, and instead of spending the day shouting about how good the number was, David Cameron instead spent the day bad mouthing Russell Brand.
The fact that we have seen an 8.4% growth since the last election will be something that gives Mr Cameron a little more hope that he still can use the economic recovery as his trump card. Polls put the Tories somewhere between 3 and 6 points ahead with only just over a week to go until polling day.
European markets will be hoping for strong data this morning to try and recoup some of the losses from yesterday’s session. It seemed that the fall was more of a reaction to the overnight movements in asia and the US rather than a fall on any major news event. In fact optimism over Greece over the last few days has helped European markets, whichever way you look at it at the moment Greece does seem to making some headway with talks.
Of course there is still no guarantee that any deadlines will be hit, but the fact we can see some positive signs will buoy Europe. However Mr Tsipras warned yesterday that it may well be the Greek people that decide on the measures being proposed by the ECB and IMF, as many of the terms go against election promises his party pledged when they got into power.
As mentioned today we will be dominated by the US GDP reading and after some poor economic data over the last few weeks, the prospect of raising interest rates in 2015 is starting to wane. The biggest issue is that the numbers have just not been good enough out of the US to convince Janet Yellen that the economy is strong enough.
Although only a preliminary number, a miss here would further harm those eyeing for a rate hike this year. The number is expected to be a rather subdued one, and poor weather yet again is likely to be blamed for the slump. With that in mind it would have to be a strong turnaround in Q2 in order to point to a September hike.
This story is being played out in our openbook network as well as many traders are still opting for the shorter term plays due to the uncertainty over the key events. Our sentiment readers are currently changing on a daily basis with 73% of trader still eyeing US dollar strength this morning on EURUSD, but that number changing significantly when we look at the Dow Jones with only just over 50% now eyeing strength. We would expect strength in one to point to weakness in the other, but such is the uncertainty many are undecided.