Can US GDP Offer Lift on Otherwise Downbeat Day?

Financial markets are set to open on a more downbeat note on Friday, with earnings from Amazon on Thursday being blamed for the initial underperformance along with the US Senate’s inability to pass the “skinny repeal” of Obamacare.

Amazon Earnings Weigh “Skinny” Obamacare Repeal The Real Problem

While Amazon’s results may only be responsible for some short term negativity, with the tech sector as a whole still enjoying a remarkable year, the failure in the Senate could pose further problems for President Donald Trump and his growth agenda. It’s generally believed that the repeal of Obamacare will unlock the ability to cut taxes, a key policy of Trump’s during the campaign and one that was partly responsible for such a strong post-election rally in equities, the dollar and rates.

CAC Slips as French CPI and Consumer Spending Decline

Equity markets have been rather resilient to the delayed approval of tax cuts and spending measures that were intended to boost growth in the world’s largest economy, from the currently below par levels. This has been aided by healthier earnings, as we’ve once again seen for the second quarter, despite the occasional blip, as we had with Amazon. Today is looking a little quieter but we will get numbers from Exxon Mobil, Merck and American Airlines, among others.

US and Canadian GDP Releases Eyed

Friday is also looking a little quieter on the economic data side as well, with US and Canadian second quarter GDP the only notable releases. The US will be of particular interest, with expectations currently for quite a sizeable upward revision to 2.5% which would make the first half of the year not the shambles it first appeared. With inflation and jobs data still to come next week, it could also act as another incentive for the Fed to pursue another rate hike this year – although that’s unlikely to come until December – with policy makers comfortable with the path the economy is on.

Source – CME Group FedWatch Tool

We’ll also hear from Neel Kashkari later on today, a voter on the FOMC and arguably its most dovish member. While his comments will be of interest, being one of the few doves among a committee who’s consensus is still to tighten does mean his comments possibly carry less weigh, as far as traders are concerned.

The Roller Coaster

Economic Calendar

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.