Eyes on the U.S. GDP

Pessimism is dominating the financial markets for another day. U.S. lawmakers did not reach yet to an agreement to raise the debt ceiling and cut spending, which is pressuring the high yielding assets and increases demand on safe Haven.

August 2 is the deadline for such an agreement, otherwise the U.S. will risk to default and have its credit rating downgraded. This could have catastrophic effects on the global financial markets.

Thereby caution, volatility and swift trading will persist until U.S. policy makers will manage to reach a decision. The U.S. GDP today will also be a major focus for investors as the economy may grow in Q2 by 1.8% compared with 1.9% in Q1.

Investors are concerned by the U.S. growth prospects, so today’s report will be of interest for the Forex, commodity and equity markets, yet Washington will continue to be a main generator for sentiment.

Investors have been loosing their confidence since financial distress is seen from both sides of the Atlantic. Spain was also put under review for downgrade by Moody’s which cast more doubt on EU’s ability to contain the credit crisis.

Meanwhile the European economy released today a lower than expected CPI flash estimate for July, raising speculations that the European Central Bank may not need to raise interest rates in September as previously expected.

This outcome managed to increase the euro’s downside pressures. The single currency is trading around the 1.4280 level. The pound is trading in a euro centric mode, with a downside momentum, around the 1.6290 level.

U.K. released today a disappointing M4 money supply for June, yet the economy witnessed an improvement in the net consumer credit and mortgage approvals in June. However the data did not get much attention from the markets.

Although the U.S. economy is expected to grow in Q2 at the slowest pace since the recession ended, risk aversion and pessimism continue to support the USD. The dollar index is trading as of this writing around the 74.30 level.

The U.S. will also release today the consumer’s sentiment for July via University of Michigan index, and the Chicago PMI, which will be of some interest since the manufacturing sector has been rather disappointing lately.

Gold fell from its highs, yet remains near its all time record with the rising uncertainties from both sides of the Atlantic. The precious metal is now treading in a tight range around the $1613.65 level.