US GDP, Euro Bond Auction Headline Tomorrow’s Markets
Ending a rather uneventful week, currency traders will be eyeing two major economic events tomorrow in dictating end of the week volatility. Even though there is a slew of data to be released tomorrow, market speculators will be focusing in on both the US advance GDP figure and the upcoming Italian bond auction results.
An advance look into the world’s largest economy and its expansion in the first quarter of 2012 is expected to garner the full attention of the market. This is in large part due to the fact that the Bureau of Economic Analysis is estimated to report a slower pace of growth compared to the previous quarter’s annualized figure. In the last quarter of 2011, the US was able to eke out a 3% pace of growth – larger than had been previously anticipated at the beginning of the year. However, with manufacturing seemingly slowing down in the first three months of this year, forecasts have declined to 2.6%. Should the figure dip below estimates, it would have negative implications for major currencies like the Euro and Australian dollar in the short term.
However, declines may be relatively minimal as the report stands as the first in a line of three reports on gross domestic product.
As has been the case in the last 2-3 quarters, European bond auction results will once again take center stage with Italy set to auction off benchmark 10-year bonds to the global investment community. The takeaway from tomorrow’s results will be whether or not the offering is able to garner enough demand – not the size or yield of the offering. Lackluster demand from a previous Spanish bond auction and even thinner demand in yesterday’s German bund auction is placing some importance on Italy’s scheduled event. Anything less than a benchmark 1.8 times supply is likely to lead to further depression in Euro gains, as Italian yields will more than rise on a negative development.
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