Greece Experiences First Economic Growth in Years
In a sign of changing times, Greece managed to outperform GDP expectations by a wide margin, showing stunning growth of 0.80% in the second quarter. This comes after the country managed to swing back into positive territory in the first quarter after results were revised higher to 0.00% amid an uptick in economic activity. However, it should be noted that capital controls that were instituted earlier in the summer might put a dramatic dent in third quarter numbers after withdrawal limits caused a near cessation in spending. Greek Parliament managed to approve the latest bailout arrangement cobbled together with creditors, passing a major hurdle ahead of the payment due to the ECB on August 20th. Meanwhile, other European peers are exhibiting slower growth as evidenced by GDP numbers released from France and Germany earlier in the session.
US retail spending managed to also surprise markets, matching analyst expectations after failing to overcome similar measures in six of the last seven months. The uptick of core and regular retail sales comes after the disastrous results in the prior month which were revised notably higher compared to earlier prints. While the consumer is spending on the headline, confidence continues to be dented and looming concerns about the debt bubbles in subprime auto-lending and student loans should give pause for caution. Also concerning is the dramatic rise in business inventories with the inventory-to-sales ratio climbing to heights indicative traditionally of a recession. Nevertheless, the dollar has shrugged off the worsened outlook, snapping a losing streak and rallying against major peers while driving gold prices lower.
Crude oil prices retreated to the lowest level in six years as concerns about the outlook for the oversupplied energy market remain. The latest IEA data seems to confirm that current conditions will likely prevail well into 2016, meaning the oil market is unlikely to find equilibrium between supply and demand in the near-to-medium term. This could spell a further rout in prices, evidenced by yesterday’s brief flash crash in oil prices which saw the $42 handle taken out in West Texas Intermediate. Although the spread between the Brent and WTI benchmarks has widened back to more traditional levels, the propensity for further downside in the complex as a whole is likely, especially after a technical retrace to the upside after recent momentum lower.
EURGBP Upward Channel Trading Opportunity
The Euro has continued the gradual upward march against the Pound after rebounding from multi-year lows reached back in July. Buoyed by stronger economic data and an uptick in GDP growth, the Euro continues to gain ground as the UK faces its own set of fiscal and monetary policy quagmires. The upward trending channel pattern emerging in the EURGBP pair has a predominantly bullish bias with ideal positions taken at the lower channel line targeting the upper channel line as an exit point. Shorting the channel is not suggested due to the worsened risk-reward characteristics. However, should EURGBP fall below the lower channel line it does indicate the potential for a channel-based breakout to the downside.