Sharp Losses for USD After GDP Data

Although demand for safe haven persisted on Friday, the USD was severely punished by the market participants following the disappointing U.S. GDP report. The U.S. economy expanded during the second quarter at the slowest pace since the recession ended, after almost stalling during the first quarter.

The economy grew by an annual 1.3% in Q2, compared with 1.9% growth in Q1, however the first three months’ growth reading was severely revised down to 0.4%. The U.S. also released a disappointing Chicago PMI report that dropped to 58.8 in July from 61.1 previous. While the consumer sentiment also disappointed today falling unexpectedly to 63.7 from the previous 63.8, which is no longer a surprise amid these developments.

Meanwhile the U.S. lawmakers continue to keep the markets edgy due to their failure to reach to an agreement to raise the debt ceiling and cut spending, less than a week before August 2 deadline. A possible default combined with sluggish growth and a possible downgrade for Spain pushed investors towards safe haven.

Stocks in the United States fell sharply at opening on Friday, where the Dow Jones Industrial Average was down by nearly 0.81% to trade around 12140.44, while the S&P 500 index fell by almost 0.81% to trade around 1290.14. European stock indexes were sharply lower before closing on Friday, where FTSE 100 was down by nearly 1.53% trading at 5783.29 and the DAX was lower by nearly 1.54% to trade around 7079.58.

The U.S. dollar fell sharply against a basket of major currencies on Friday, where the U.S. dollar index was trading at 73.85 as of this writing, compared with the highest of the day at 74.50. The Euro rose today affected by the dollar weakness, where the EUR/USD pair is trading at $1.4385, compared with the lowest of the day at $1.4227. The British Pound also rose considerably against the dollar, where the GBP/USD pair trades at $1.6415, compared with the lowest of $1.6259.

Gold rose to a new record high at $1632.42 on Friday as demand for safe haven increased, and as of this writing is trading around $1628.35 an ounce. Crude oil prices fell considerably today on fears the global economic recovery will be affected the U.S. slowdown in growth therefore demand on oil will lessen. Crude oil prices are trading at $95.50 a barrel.