Thursday, 16 Jul 2009

Mixed Economic Data Brings About a Volatile Trading Day

Trading was extremely volatile today as an array of mixed economic data was released throughout the day

Riskier currencies advanced earlier following the release of the latest U.S Unemployment Claims report that showed U.S first time unemployment claims fell to the lowest level since January. Further push to risk appetite came from the release of better than expected second quarter earnings from JP Morgan Chase as well as the release of China's GDP.

However these gains were short lived, beginning to falter as U.S stocks opened lower on the expectation that CIT Group Inc. will declare bankruptcy next week and pushing investors to re-evaluate their recent turn to risk appetite. Intensifying risk aversion was the release of worse than expected data from the Philadelphia Federal Reserve Business Index which declined to -7.5 in July from -2.2 a month earlier. The employment portion of the index also dropped to -25.3 from -21.8 while new orders and inventories also declined. Crude prices also dropped as they are highly correlated with movements in equities.

However stock markets rebounded later on in the day and with them so did riskier currencies and commodities as volatility in stocks has been the driving force behind currency valuations these past few weeks.

With a light news day tomorrow most of the market volatility is expected to come from the release of the earnings report from Bank of America as well the release of U.S Building Permits and Housing Starts data at 12:30 GMT.