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Oh Say, Can you See...A better Economic Data - Thursday's Outlook

|Includes:ELEMENTS Australian Dollar (ADE), BEO, BEP, CNY, DJ, ERO, EWA, EWC, EZU, FEZ, FXB, FXC, FXE, FXF, FXY, GBB, GLD, GRE, IFNA, IWB, JYF, JYN, MZG, NFP, SPXL, SPY, SPY, UDN, USD, UUP, VCR, XLY, YCL, YCS
Overlook
A heavy day in terms of economic data spurred some movement in the currency markets. Euro rallied ahead of its ever important bank stress test which is due out on Friday. Cable rallied as Retail Sales printed much better than anticipated. The Loonie was trading choppy due to a considerable miss in retail sales and mixed announcements from the BOC. The Yen Seems to be structuring a top.
Oh Say, Can You See...A Better Economic Data
European economic data printed higher than anticipated at almost all of the releases. Ever important Service and Manufacturing PMI’s seen considerable strengthening. German Manufacturing sector grew at a stronger pace than anticipated. German Manufacturing sector expanded to 61.2 compared to anticipated figure of 58.0. European Manufacturing sector generally tends to follow the same scenario as its biggest contributor, Germany. European manufacturing sector beat the estimates to print at 56.5. The service sector also seen considerable growth, German service sector grew to 57.3, while European service sector expanded to 56.0. Growth in the service and manufacturing sectors within the Euro-zone gives a breath of fresh air to the risk rally. For three consecutive months the manufacturing sector has been slipping causing concerns for a higher yielding currencies rally. Business conditions have dramatically improved compared to the previous months suggesting the economy has a strong potential to improve until the end of the year.
Nonetheless, the markets are highly anticipating the release of tomorrow’s bank stress tests. A robust expansion in the industrial new orders is a positive sign that the businesses are expanding on production. The following suggests that credit is easier to come by and demand is expected to pick up in the upcoming month. Overall, the picture looks rosier for the Euro-zone as economy continues to win the uphill battle. The Euro has legs to breach its high established earlier this week. Nonetheless, the uptrend will only have the power to surpass the resistance level, if tomorrow’s stress test turns out to be positive. To add to the optimist, consumer confidence improved considerably from the previous month.
Football/Soccer is Driving the Retail Sales
In the meantime, British Retail Sales have continued to show a spectacular growth. UK sales jumped 0.7% against anticipated 0.5%, and grew at a pace of 1.3% on the annual basis. With the British economy being behind the curb along with Japan and partially US in terms of economic recovery, the figures are a blessing. World Cup promotions, good weather, and summer discounting were the main drivers behind the increase. Going forward, consumer demand will be tested as government’s austerity commitment can weight down on the spending. Tomorrow’s GDP figures will be the main driver for the Pound. The economists predict that the economy grew at a pace of 0.6% on quarterly basis and at 1.1% annually.
Raising  Rates is a Loosing Game for Canada
Retail Sales in Canada disappointed for the second consecutive month suggesting that the interest rate hikes are finally catching up with the economy. The Canadian economy is going less strong than expected. Blame the rapid and mistimed interest rate hikes. The manufacturing sector is moderating considerably while consumer is reluctant to spend is a recipe for a disaster. Look for Canadian Monetary Policy meeting to drive the markets today.
What to look for the day
All eyes on Bernanke, Part 2
In the US, the housing market moderated in its trajectory downward as summer season added to home purchases. Summer season tends to be the best time for the housing market. Adding in mortgage rates which currently stand at a all time lows, the housing market has some room to turn around. Housing Prices rose by 0.5% suggesting that there is demand and at least some room to increase prices without an affect. Raising the prices modestly was not a concern for buyers as Existing Home Sales bought homes at a faster pace than anticipated, yet considerably lower than the previous. A negative notion for the labor picture came on the midst Unemployment claims which escalated from 427k to 464k. The jump in the unemployment claims can be blamed on the unwinding of temporary U.S. Census workers.
During the semi-annual speech by Chairman Bernanke, the orchestrator of US economic recovery from the ground up stated that the economic outlook is ‘highly uncertain’ for growth. Despite the economic turnaround slowing down, Bernanke’s testimony supported a belief that the Federal Reserve will be relatively reluctant to create other quantitative easing programs. The Dollar will likely to be under pressure as the economy is seen a possibility of a double dip recession. Despite the probability of this event being low, the mere thought is weighting on the Dollar.
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