Spanish unemployment set to hit 25% ahead of US Q3 GDP
By Michael Hewson (Senior Market Analyst at CMC Markets UK)
Yesterday?s better than expected rise in UK Q3 GDP by 1% had some of the gloss taken off it by the news that US car giant Ford would be closing two UK production plants with the loss of 1,400 jobs, as the company sought to stem the losses from its European operations.
The job losses highlight the problems faced by the UK economy and the effects of the problems going on in Europe as the continent strives to get on top of the sovereign debt crisis which is slowly suffocating the European economy.
The problems being experienced by French car manufacturer Peugeot are another case in point as that company comes under pressure from the French government to hold back from the closure of some of its French operations, as it haemorrhages cash on a daily basis.
Unfortunately due to the slowing European economy the demand for all these vehicles just isn?t there at the moment and judging by some of this week?s woeful economic data it would appear that the problems are getting worse, with even Germany?s economy feeling the effects of the economic slowdown after this week?s latest PMI manufacturing data, showed a much sharper contraction than markets had expected.
The problem of rising unemployment in Europe is once again in the spotlight today with the release of Q3 Spanish unemployment numbers which is expected to rise from 24.6% to hit the 25% mark.
After the surprise of yesterday?s better than expected UK Q3 GDP number attention turns across the pond to the release of the first indication of US Q3 GDP numbers with similar expectations of an improvement from the numbers seen in Q2.
While the improvement is not likely to be as large as the UK?s number, expectations are high given some of the recent data from the US that we could well see an increase from Q2?s 1.3% to 1.9%.
Any number less than a 1.9% rise will likely raise concerns that despite the Fed?s best measures to help stimulate the economy, concerns about inaction with respect to the upcoming US fiscal cliff is starting to have a chilling effect on the US economy in the lead-up to next month?s US Presidential elections.
EURUSD ? yesterday?s rally faltered at 1.3030 slipping back once again towards the 1.2920 lows of earlier this week.
Expectations remain for a move towards the 200 day MA at 1.2835, as well as trend line support from the 1.2045 lows at 1.2880. This remains the key level supporting further gains; otherwise we could well see a quick return to 1.2650.
On the upside the main resistance remains at trend line resistance 1.3110, from the 1.4940 highs.
Only a move above 1.3240, targets 1.3495, the 50% retracement of the entire down move from 1.4940 to 1.2045.
GBPUSD ? yesterday?s cable move managed to climb back towards the 1.6140/50 area and trend line resistance from the September highs at 1.6310, however it is currently struggling to overcome it, though a break higher is likely to suggest a retest of 1.6310.
This resistance remains the main obstacle to further gains keeping alive the prospect of a move back towards the 1.5820 area in the longer term, on a break below 1.5910.
EURGBP ? the failure of 0.8070 to hold sure enough saw the move to 0.8020 unfold fairly rapidly and with it open up the risk of test of 0.7960, trend line support from the 0.7755 lows. Resistance can now be found at 0.8070 while the 200 day MA at 0.8110 also becomes major resistance on any pullbacks, while behind that the tweezers top at 0.8160 should also act as significant resistance.
USDJPY ? the push back above the 80.00 level now opens up the June highs at 80.60. We need to close above 79.80 on the week to open up a move to 81.00 which is the top of the weekly cloud.
To sustain this move higher any pullbacks need to hold above the 79.20 area, otherwise we could well see a fall back towards 78.50.
Equity market calls
FTSE100 is expected to open 58 points lower at 5,747
DAX is expected to open 57 points lower at 7,143
CAC40 is expected to open 44 points lower at 3,367