Tuesday, July 26, 2011

US Dollar may Suffer this Week from the Economic Data

US Q2 GDP is released on Friday at 4:30 pm (GMT+4). If the reading is low, US dollar will get under a very negative pressure the debt burden will be accompanied by the nation’s economic weakness.

Economists surveyed by MarketWatch expect to see annual growth 1.6% after 1.9% in the first quarter.

During the past 7 quarters the growth accounted for 2.8% on average. Never the less, for US to enjoy the sustainable decline in unemployment, economic growth pace has to exceed 3%, so the results between 2.5% and 3% just won’t be enough.

It’s also necessary to note that many experts are already thinking about the third quarter hoping that the economic situation in the US will improve due to the increased auto output as the Japan supply-chain problems are resolved as well as lower commodity prices. However, if the Q3 data disappoints the market the sentiment will turn very negative as traders are tired of the constant bad news they have been getting so far.  

Analysts at JPMorgan also advise investors to pay attention to US bond auctions. US Treasury will offer 2-year securities on Tuesday, 5-year papers on Wednesday and 7-year bond on Thursday. In their view, low demand for Treasuries will make dollar weaken versus Japanese yen, Swiss franc and the single currency.

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