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European Growth Metrics Mixed

Monetary Policies Have Boosted Some Euro Area Economies While Others Deteriorate

euro-crisis

Although some Euro Area nations are experiencing a positive upturn in economic momentum, it is coming at the expense of other regional economies as evidenced by the latest preliminary GDP figures. France growth has surprised expectations to the upside while the German economy suffers from a lack of global export demand.

German GDP Growth Slows

Gross domestic product figures released from Germany this morning show that the core Euro Area economy is facing substantial headwinds after the revelation that quarterly GDP expansion slowed from 0.70% to 0.30%, more than the expected drop to 0.50%. Annualized GDP was also disappointing, printing at 1.10% versus expectations of 1.20% growth. The one silver lining in the data was inflation, with CPI figures climbing back to unchanged after treading into negative territory the prior month. Although on the rebound, the DAX continues to broadly trend to the downside in an equidistant channel pattern as the latest data raises concerns to the outlook. Euro Area aggregate GDP is due out later and expected to grow more than the prior period, highlighting that growth is coming from a recovery in other regional economies like France.

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dax-jun1505132015

China Puts Breaks on Investment

Even after several successive interest rate cuts and reserve ratio requirement adjustments certain metrics underlying the Chinese economy continue to contract. Growth in fixed asset investment slowed to 12.00% expansionary pace year over year compared to 13.50% prior. Industrial production grew on an annualized basis, climbing to 5.90% versus 5.60% recorded prior although missed estimates of 6.00% growth. The shift towards more of a domestic consumption model has also experienced headwinds as evidenced by the latest retail sales figures which retreated to 10.00% from 10.20% prior. Nevertheless, interest in Chinese stocks continues to grow with the Chinese CSI-300 futures contract turnover now outstripping liquidity in the S&P 500 futures contract, emphasizing the growing importance of Chinese futures in the global financial markets.

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Oil Inventory Draws Accelerate

The tremendous gains in oil prices have seen producers pulling supplies out of storage at an astonishing pace in response to the recent gains in oil prices. With both the West Texas Intermediate and Brent Crude benchmarks trading at or near multi-month highs, producers are racing to sell stored production, while also ramping up production levels to take advantage of the rally. The American Petroleum Institute figures released yesterday showed that inventories experienced a drawdown of 2 million barrels, the second week in a row that storage figures have declined. Energy Information Administration data due later in today’s session is expected to confirm the reversal in the storage trend, although there are concerns among analysts that crude prices have overshot to the upside in the latest rebound, raising the possibility of a substantial correction.

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GBPUSD Equidistant Channel Technical Pattern

The Pound Sterling continues to broadly benefit from the election momentum, rising against peers as expected continuation of austerity measures and slashing of the national welfare budget bolster the economic outlook. Although Mark Carney has left monetary policy unchanged due to the deterioration in inflationary conditions, the Pound continues to trend to the upside. The equidistant channel pattern setting up in the GBPUSD pair the last few sessions has a bullish bias following the trend higher. Trend following tactics with positions taken at the lower trend line are the prevailing strategy with the upper channel line as the target. Any move outside the channel lines should be treated as a breakout trade, with today’s policy speech a possible catalyst for directional momentum.

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