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Illustration: Phil Couzens

U.S. Economy: First Down, First Up?

Friday’s U.S. Q3 GDP report was just what the market was looking for – at +3.5% it was the highest level of growth for more than one year. That it was accompanies by a 5% growth in business sector nominal GDP has analysts buzzing in that it could finally spur greater confidence and spending.

Pause, stop and take a deep breath to wait for evidence that this will in turn generate jobs to finally bring unemployment lower and therefore spur greater demand. On that front, on the same day the announcement that consumer spending dropped -0.5% in September tends to take away from the shine.

Meanwhile European data appears bogged down by the highest level of unemployment in over 10 years. No doubt Japan will be watching and hoping the upturn in the States could help bring a boost to exports…

However, after the dollar recovered against the European currencies it has promptly turned back lower again today. There’s a good chance the it will continue to marginal new lows but as we now move into the last 6-7 weeks of normal trading for the year it seems inevitable that at some point over the same period we shall begin to see the dollar rally – and one that should last into the New Year.

Not so against the yen which after poking its head above 92.00 promptly reversed back lower. The rain clouds do seem to be collecting around Dollar-Yen and while I can’t actually rule out a second visit higher back to 93.00-94.00 the coming weeks do seem to be pointing to a much lower Dollar versus the yen.

As I mentioned 2 weeks ago, the yen’s weakness against the European currencies sharply reversed and on a larger scale the risk remains for further yen strength although in the earlier stages this could still be quite choppy.

Ian Copsey


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