Blog

http://uk.reuters.com/article/2012/07/13/uk-italy-ratings-idUKBRE86C00K20120713

Growth eased from an 8.1% expansion in the first quarter, and matched expectations of economists polled by Dow Jones Newswires. The growth rate was the weakest since the first quarter of 2009.

http://www.marketwatch.com/story/china-second-quarter-growth-cools-to-76-2012-07-12?dist=tcountdown

If the jobs number made investors more optimistic, currency pairs such as the EUR/USD, GBP/USD and AUD/USD would recover more significantly but they did not.  This suggests that the recovery in equities is caused by expectations for additional liquidity from central banks, which would be consistent with the weakness in currencies. 

The sell-off in the currency market today has been driven by risk aversion and deleveraging. The decision to cut interest rates by the central banks of South Korea and Brazil over the past 24 hours confirms that policymakers around the world are intimidated by the risk of slower global growth in the second half of the year.

The rest of the North American trading day will most likely be driven by equity flows in anticipation of Chinese GDP, which is expected to fall below 8% for the first time since the first quarter of 2009. Last week’s surprise interest rate cut by the People’s Bank of China, viewed as the Chinese Bat-Signal that there is danger afoot, only served to strengthen that expectation. While the release is scheduled for 10pm Eastern Time tonight, be wary of leaked results beforehand that may cause significant moves rather unexpectedly.

fx360..com