The Dollar is trading slightly better as traders await this morning’s U.S. 3rd Quarter GDP Report. The Forex markets are reversing yesterday’s gains. Risk aversion seems to be back in the market as higher yielding assets are feeling downside pressure. Thin volume in this holiday shortened weak is contributing to the weakness in foreign currencies along with liquidation ahead of the U.S. Thanksgiving holiday.
The December Euro is trading slightly better while the Dollar is strengthening versus all others. The Euro is up because German business confidence increased more than economists forecast to a 15-month high in November.
This report suggests that the German economy may start to show some solid gains next year. Manufacturers are replenishing inventories and exports are expanding. This is good news because many investors thought the Euro Zone exports would show a decline after the rise to $1.5000 in the Euro. All of this news points toward expansion during the fourth quarter.
Skeptics still believe the economy is poised to weaken further. They attribute the gains in the economy to government stimulus. Many think the economy will falter once stimulus measures are removed. They cite the possibility of weaker consumer spending and slower exports as the main reasons why the economy will struggle in the future. The main reason for the decline in exports will be the high priced Euro.
U.S. equity markets are trading flat to higher ahead of this morning’s U.S. 3rd Quarter GDP Report. Expectations are for the report to show a decrease in the economy from 3.5% to 2.8%. A wider trade gap and faltering consumer spending are cited as the main reasons behind the decline.
Yesterday the equity markets weakened throughout the day after a quick rally to slightly below the high for the year at 1112.25. Better than expected U.S. Existing Home Sales were cited as the main reason behind the decline. Traders dumped higher yielding assets as the Dollar rose following the report.
Treasury futures are trading slightly better this morning as traders square up yesterday’s short-positions ahead of today’s GDP number. T-Bonds and T-Notes are expected to remain stable with a slight bias to the upside as long as the Fed continues to preach that interest rates will remain low for a prolonged period of time. A strong rise in the equity markets is likely to limit gains.
December Gold is trading higher but below yesterday’s record high. A stronger Dollar is helping to limit gains. Strong central bank buying is providing the support. Traders should continue to watch December Silver and January Platinum for divergence signals.
January Crude Oil is called slightly better. Weaker equity markets and a stronger Dollar should put pressure on the energy complex. Supply/Demand factors still point to a bearish scenario.
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