Could US GDP print be ‘too’ good ?

15.10 AEST, Friday 26 April 2013

Could US GDP print be ‘too’ good ?

By Tim Waterer (Senior Trader, CMC Markets)

The Australian Dollar may have found some support from the recent rebound in commodity prices, however the low inflation print from earlier in the week is limiting the currency’s moves to the upside given that a possible 25 basis point rate reduction is now back in the frame. Today though, the AUD spent plenty of time trading above the 1.03 level with traders showing a subtle inclination towards risk assets ahead of the US GDP print tonight. Expectations are for a strong GDP number however if it comes in much higher than the 3% level I don’t think the market will be too overjoyed given the potential QE timeline implications. I suspect traders will in fact want to see a good GDP print, just not ‘too’ good to the point where QE could be at the threat of being pulled early.

Following some highlights from US and European session, equity markets across Asia mostly ambled higher today with the UK GDP result and the US initial jobless claims data providing sources of optimism for traders. However, there did not appear to be any great conviction on the market today with traders knowing that the upcoming US GDP result has the potential to throw a spanner in the works.

The Australian market initially looked very refreshed after the ANZAC day break, with the index off to a bumper start with the Materials sector the driving force. However as the day progressed, while resource stocks maintained their support, elsewhere it was a different story as the earlier buying momentum dried up. The pattern of trading today suggests there was perhaps some reluctance to take new positions into the weekend, particularly ahead of the US GDP release. The bellweather mining stocks made the most of the resurgent commodity prices to be among the stand-outs today, while elsewhere the defensive Telco sector also fared well. But overall, the ASX200 meandered to the finish line to cap off what has nonetheless been a very productive week on the local bourse.

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