• The dollar was higher against the euro on Friday but lower versus other major currencies. US GDP rose at a 2.4% annualized pace in Q2 2010. While Q1 GDP was revised higher, estimates back to 2007 were revised lower. The S&P 500 increased 0.07 to 1,101.60. The euro fell from yesterday’s nearly 3-month high. Sterling traded at $1.5689 today, compared with $1.5612 yesterday. The Swiss franc gained for a third consecutive day against the euro and hit the highest level in a week. The Canadian and Australian dollars advanced against the greenback. The Reserve Bank of Australia is expected to maintain its key interest rate at 4.50% next week.
• The USD/JPY fell for a third straight day on carry-trade unwinding and weak Japanese economic data. Japan’s industrial production unexpectedly fell, jobless rate increased and consumer prices declined in annual terms for a 16th successive month. The pair fell to the lowest level since November 2009. If the 86-area support is broken, the USD/JPY will probably fall to the lower trading band in the 85 area.

Financial and Economic News and Comments

US & Canada

• US GDP grew at a 2.4% annualized rate in Q2 2010, a fourth consecutive quarterly expansion and marginally less than forecast, after an upwardly revised 3.7% annualized pace in Q1 (previously reported 2.7%), according to the advance GDP estimate released by the Commerce Department. Q2 GDP rose 3.2% y/y. The largest positive contributors to Q2 GDP growth were business investment in equipment and software, personal consumption, and inventories, while the weakest component was net exports. Consumer spending increased at a 1.6% annualized pace in Q2 after a downwardly revised 1.9% annualized rate in Q1. The GDP price index advanced at a 1.8% annualized pace, following Q1’s downwardly revised 1.0% annualized rate.

• The US employment cost index increased as forecast a seasonally adjusted 0.5% q/q in Q2 2010 after a 0.6% q/q advance in Q1, according to data from the Labor Department. ECI growth quickened to 1.8% y/y nsa from Q1’s 1.7% y/y.
• The Thomson Reuters/University of Michigan final consumer sentiment index declined to a better-thanexpected 67.8 (vs. preliminarily reported 66.5) in July from 76.0 in June, indicating US consumer confidence fell to the lowest level since November 2009, the latest Thomson Reuters/University of Michigan surveys of consumers showed, compared with July 2009’s 66.0. The current economic conditions index decreased to 76.5 (vs. preliminarily reported 75.5) in July from 85.6 a month earlier. The consumer expectations index declined to 62.3 (vs. preliminarily reported 60.6) from June’s 69.8.
• The Chicago business barometer unexpectedly increased to 62.3 in July from 59.1 in June, indicating US business activity expanded beyond the 50 growth level for a 10th straight month and at a faster pace, according to the Chicago Report by Kingsbury International, Ltd. and the Institute for Supply Management – Chicago, Inc.
• Canada’s GDP increased 0.1% m/m to a seasonally adjusted C$1.23 trillion ($1.19 trillion) annual rate in May, the eighth gain in nine months, after stalling in April, figures from Statistics Canada showed. May GDP rose 3.8% y/y.

Europe

• The eurozone consumer-price inflation rate accelerated to 1.7% y/y in July, the fastest since November 2008, from 1.4% y/y in June, according to a flash CPI estimate released by Eurostat. However, monthly CPI fell 0.4% m/m in July, the first month-on-month fall since January.

• Eurozone unemployment was up a seasonally adjusted 6,000 m/m to 15.771 million in June, the sixth increase in seven months, a separate report from Eurostat showed. The seasonally adjusted unemployment rate held as expected at 10.0% for a fourth consecutive month in June, the highest since August 1998, compared with June 2009’s 9.5%.
• TGerman retail sales, adjusted for calendar and seasonal variations, fell a more-than-expected 0.9% m/m in June, the third fall in four months, after an upwardly revised 3.0% m/m May gain that was the most since January 2008, according to data from the Federal Statistical Office. Retail sales rose 3.1% y/y, following May’s revised 0.7% y/y decrease.
• The KOF Swiss economic barometer was at 2.23 in July, unchanged from a downwardly revised 2.23 in June and halting its upswing since May 2009, the Konjunkturforschungsstelle Swiss Institute for Business Cycle Research reported, asserting that Switzerland’s year-on-year economic growth rate will likely remain “correspondingly positive throughout the next few months.”
• The GfK NOP UK consumer confidence index declined to a slightly lower-than-expected -22 in July from -19 in June, indicating UK consumer sentiment slumped for a fifth consecutive month to an 11-month low, according to data from GfK NOP. Consumer sentiment about prospects for the UK economy in the next 12 months continued its decline, with the expectations gauge falling to -25 in July from -12 a month earlier.

Asia-Pacific

• The seasonally adjusted Nomura/JMMA manufacturing PMI declined to 52.8 in July from 53.9 in June, indicating the Japanese manufacturing sector expanded above the 50 growth level for a 13th straight month but at the slowest pace in four months, a PMI report released by Markit Economics showed.
• The seasonally adjusted Nomura/JMMA manufacturing PMI declined to 52.8 in July from 53.9 in June, indicating the Japanese manufacturing sector expanded above the 50 growth level for a 13th straight month but at the slowest pace in four months, a PMI report released by Markit Economics showed.
• Japan’s core consumer prices, which exclude fresh food, slipped 1.0% y/y in June, a 16th successive year-onyear decline but easing from a 1.2% y/y decrease in May, according to CPI data from the Statistics Bureau. The CPI excluding food and energy fell 1.5% y/y, following May’s record 1.6% y/y drop. Tokyo’s core CPI, a leading indicator for nationwide price trends, slid 1.3% y/y in July, matching June’s year-on-year decline.
• Japanese industrial production unexpectedly fell 1.5% m/m sa in June, the first fall in four months and the most in more than a year, after a 0.1% m/m increase in May, preliminary June IP data from the Ministry of Economy, Trade and Industry showed, with the IP index declining to 94.7 from May’s 96.1. June IP rose 17.0% y/y nsa, a seventh straight year-on-year rise but smaller than a 20.4% y/y May gain.

• The Japanese seasonally adjusted unemployment rate unexpectedly rose to 5.3% in June, a fourth consecutive monthly rise and a 7-month high, from 5.2% in May, according to data from the Statistics Bureau. The economy added 40,000 jobs from a month earlier, the first monthly gain in five months. The job-toapplicant ratio, a leading indicator of employment trends, increased to 0.52 in June, the highest level since March 2009, meaning there were 52 positions for every 100 candidates, compared with May’s 0.50.
• Japanese household spending unexpectedly increased 0.5% y/y in June, the first gain in three months, after a 0.7% y/y decline in May, a separate report from the Statistics Bureau showed.
• Australia’s private sector credit increased a slightly less-than-expected 0.2% m/m in June after a 0.5% m/m advance in May, data from the Reserve Bank of Australia showed. Private sector credit rose 2.8% y/y, following May’s 2.7% y/y rise.

FX Strategy Update

EUR/USD USD/JPY GBP/USD USD/CHF USD/CAD AUD/USD EUR/JPY Primary Trend Negative Neutral Negative Positive Negative Neutral Negative Secondary Trend Neutral Negative Positive Negative Neutral Positive Negative Outlook Neutral Neutral Neutral Neutral Positive Neutral Neutral Action None Long None None Long None None Current 1.3030 86.38 1.5689 1.0414 1.0280 0.9044 112.56 Start Position N/A 87.75 N/A N/A 1.0247 N/A N/A Objective N/A N/A N/A N/A N/A N/A N/A Stop N/A 85.75 N/A N/A 1.0075 N/A N/A Support 1.2950 86.00 1.5300 1.0400 1.0300 0.8750 107.50 1.2550 84.80 1.5000 1.0300 1.0200 0.8600 106.00 Resistance 1.3250 90.00 1.5700 1.0750 1.0600 0.9050 115.00 1.3500 92.00 1.6000 1.1000 1.0800 0.9250 120.00

Expert Market Commentaries, charts and information are provided by Hans Nilsson of Globicus International, Inc., a registered third party CTA, are intended for educational purposes only and do not constitute trading recommendations.

Past performance is not indicative of future results. Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. Please contact a registered trading advisor if you have any questions.

This report is intended solely for distribution to customers of Capital Market Services, LLC. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, LLC with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, LLC accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Globicus International, Inc.

©2004-2010 Globicus International, Inc. and Capital Market Services, LLC.

In today’s video we dissect the 2nd quarter GDP results and what it means for the US recovery. The economy grew a smaller than expected 2.4% annualized rate. We also cover the important releases to look out for next week.

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The unemployment rate for June unexpectedly rose to 5.3% from 5.2%. That is a seven-month high for the jobless rate. A second report showed that factory output – industrial production – was down 1.5% for the month. Economists had expected a small gain. Consumer prices continued to show negative annual rates. For the country the consumer price index excluding food declined 1% from a year before.

In one positive report household spending did rise 0.5% in June compared to a year ago, following a 0.7% year-over-year decline in May. Expectations had a drop of 0.9% y/y figure. That means consumers were more willing to spend, but if the economy weakens then consumers may cut back spending again.

Japan’s economy is expected to show growth slowing to an annual rate of 1.9% in the 2nd quarter, following a sharp 5% rise in the 1st quarter.

The data will increase worries about a slowdown and put pressure on the government for solutions. Recently the Prime Minister has talked more about consolidating Japan’s fiscal deficit than stimulative economic growth. There will be increased pressure on the Bank of Japan as well, perhaps in the form of proposals to buy long-term governmetn bonds and target infaltion of 2 to 3 percent.

Breakdown of Today’s Report

Expectations had been for a 2.5-2.6% annualized rate, but the economy grew 2.4%. In the 1st quarter there was  strong upward revision showing the economy grew 3.7% – the final version for 1st quarter growth had this figure at 2.7%. The growth in the 1st quarter was driven primarily by a rebuilding of inventories.

Consumer spending, the key engine of the US economy as it makes up about two-thirds of GDP, rose by a moderate annualized rate of 1.6%, compared to 1.9% for the 1st quarter. With an unemployment rate at 9.5% it makes sense that this figure is weak right now.

Now, business spending on equipment and software continued its strong pace from the 1st quarter when it jumped 20.4%. In the second quarter, business investment was up 21.9%. Again, this highlights the contrast in the economy between high company profits and a persistently feeble jobs market which is keeping consumers at bay.

The trade gap also weighed on growth as the trade deficit widened to $425.9 billion in the 2nd quarter from $338.4 billion in the first. That subtracted 2.8 percentage points from growth. Imports were up 29%, while exports rose 10%.

Implication for Recovery and Fed

Last week, Fed Chairman Bernanke said that the economy’s outlook was “unusually uncertain”, and has stressed that it would be consumer and business spending that would have to take the reigns as government stimulus efforts fade. Also, central bank officials have already reiterated they plan to keep rates at near zero for an extended period, so unless there are some new programs that come out from the August 10th meeting of the FOMC, it’s unclear what the Fed can do at this point.

There is a growing concern that some type of support is necessary, as the threat of deflation is becoming more serious. Price data today showed the core personal consumption expenditure – a rate of underlying inflation which excludes food and energy prices and is closely watched by the Fed – increased by 1.1% from the previous quarter. That was the weakest since the 1st quarter of 2009 and lower than the 1.2% seen in the 1st quarter of 2010. In other words price pressures are heading in the opposite direction that policy makers would like.

Revisions

In the first quarter, the economy grew by 3.7%, revised up from an originally reported 2.7% increase, but as we mentioned the increase there was led by inventories. But, while 1st quarter growth was revised higher, growth estimates all the way back to the start of 2007 were revised lower. For instance the 4th quarter of 2009 saw growth of 5.0%, not 5.6%.

For all of 2009, the government said the U.S. economy contracted by 2.6%, compared to the previously estimated 2.4% decline. In the whole of 2008, GDP was flat, instead of rising 0.4% as previously estimated. In 2007, the world’s largest economy expanded by 1.9%, down from an originally reported 2.1% increase.

• The dollar fell versus its counterparts on Thursday. The 4-week moving average of US initial jobless claims decreased to the lowest level since May 8. The S&P 500 declined 4.60 to 1,101.53. The euro rose to $1.31 for the first time since May 4 as euro-area economic sentiment climbed to the highest level since March 2008. The yen strengthened to 86.79 against the dollar at 5:28 pm in NY, from 87.35 yesterday. The loonie rose against the greenback for the first time in three days on gains in oil and other commodities. The aussie also advanced.
• The dollar index broke the 82-handle support. To reverse its downtrend, the index needs to break the 83-area resistance. There is support in the 81 area.

Financial and Economic News and Comments

US & Canada

• US initial jobless claims in the week ending July 24 fell 11,000 to 457,000, in line with forecast, from the previous week’s upwardly revised 468,000, according to figures from the Labor Department. The 4-week moving average declined 4,500 to 452,500, the lowest level since May 8. Continuing claims in the week ending July 17 rose 81,000 to 4,565,000 from the preceding week’s downwardly revised 4,484,000. The 4-week moving average of those continuing claims fell 18,000 to 4,548,250. The insured unemployment rate for the week ending July 17 increased to 3.6% from the prior week’s 3.5%.

• Canada’s industrial product prices unexpectedly fell 0.9% m/m in June, the largest fall since May 2009, after an upwardly revised 0.4% m/m advance in May, data from Statistics Canada showed. The June IPPI increased 0.2% y/y, a second consecutive year-on-year gain. Raw materials prices unexpectedly slid 0.3% m/m in June, a second straight monthly slide, following a revised 7.3% m/m May decrease. The June RMPI edged down 0.1% y/y, the first year-on-year decline since November 2009.

Europe

• The eurozone economic sentiment index increased to a higher-than-expected 101.3 in July from an upwardly revised 99.0 in June, showing eurozone economic confidence improved for a second consecutive month to the highest level since March 2008, according to data from the European Commission. Consumer confidence increased to -14 in July from -17 in June; industrial confidence improved to -4 from -6; and confidence in the services sector advanced to 6 from 4. In a separate measure of business confidence released by the EC, the business climate indicator increased to 0.66 in July, a 16th straight monthly improvement, from an upwardly revised 0.40 in June.

• Germany’s unemployment fell as forecast a seasonally adjusted 20,000 in July, a 13th straight monthly decline, to 3.21 million, the lowest since November 2008, after falling a revised 20,000 in June, data from the Federal Labor Agency showed, suggesting the German labor market continues to improve amid a strengthening economy. The seasonally adjusted unemployment rate declined to 7.6% from June’s 7.7%.
• According to figures released by the Bank of England, total net lending to individuals increased by £0.6 billion ($0.94 billion) in June after a £1.1 billion rise in May. Net lending secured on dwellings was up by £0.7 billion, slightly below May’s downwardly revised £0.8 billion increase. Mortgage approvals declined to a lower-thanexpected 47,643 in June from a downwardly revised 49,461 in May. Consumer credit unexpectedly declined by £0.1 billion in June, compared with a £0.3 billion increase a month earlier.
• UK house prices fell a slightly-more-than-expected 0.5% m/m to an average of £169,347 ($264,325) in July, the first decline since February, after a downwardly revised 0.0% m/m in June, a report released by Nationwide Building Society showed. House prices rose 6.6% y/y, a 10th straight year-on-year rise but the smallest since December 2009, following June’s 8.7% y/y gain.

Asia-Pacific

• Japanese retail sales increased as forecast a seasonally adjusted 0.4% m/m in June, the fifth gain in six months, after a 2.0% m/m May decline that was the deepest in more than five years, according to data from the Ministry of Economy, Trade and Industry. Retail sales rose as expected 3.2% y/y to ¥11.004 trillion ($126.99 billion), a sixth successive year-on-year rise, following May’s upwardly revised 2.9% y/y advance. Sales at large-scale retail stores slid 3.0% y/y to ¥1.564 trillion in June, a 27th straight year-on-year slide, after a revised 3.9% y/y May decrease.

FX Strategy Update

Expert Market Commentaries, charts and information are provided by Hans Nilsson of Globicus International, Inc., a registered third party CTA, are intended for educational purposes only and do not constitute trading recommendations.

Past performance is not indicative of future results. Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. Please contact a registered trading advisor if you have any questions.

This report is intended solely for distribution to customers of Capital Market Services, LLC. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, LLC with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, LLC accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Globicus International, Inc.

©2004-2010 Globicus International, Inc. and Capital Market Services, LLC.

Expert Market Commentaries, charts and information are provided by Hans Nilsson of Globicus International, Inc., a registered third party CTA, are intended for educational purposes only and do not constitute trading recommendations.

Past performance is not indicative of future results. Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. Please contact a registered trading advisor if you have any questions.

This report is intended solely for distribution to customers of Capital Market Services, LLC. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, LLC with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, LLC accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Globicus International, Inc.

©2004-2010 Globicus International, Inc. and Capital Market Services, LLC.

Can’t blame the big fall on the transportation sector, as orders excluding transportation were down 0.6% as well. Within the transportation sector orders for airplanes fell while demand for cars and motor parts increased (2.5%). As durable goods are those designed to last more than 3 years its a sign that the manufacturing sector is cooling, and most of the decline was focused in industrial sectors such as electronics (-1.9%), machinery (-0.7%), and metals (-2.0%). Manufacturing as we should remember has been at the driver seat of the recovery and its slowdown is a bad sign. On a positive note, there was a pretty big increase in orders for computers (+2.5).

Still, there is one takeaway from this data, and that was a barometer of capital spending by business rose. Orders for non-defense capital goods excluding aircraft increased by 0.6%, after rising 4.6% in May. Expectations had been for a flat reading. That could mean that companies see the economy recovering in a way that they need to upgrade their capital infrastructure.

Overall, like I said at at the top of the story, this data will add to other data showing that the manufacturing is slowing following a strong rebound earlier in the year. With consumer confidence falling – and the propsect of weaker spending that comes with it – there is going be a challange on how to get the US economy moving again.

Expert Market Commentaries, charts and information are provided by Hans Nilsson of Globicus International, Inc., a registered third party CTA, are intended for educational purposes only and do not constitute trading recommendations.

Past performance is not indicative of future results. Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. Please contact a registered trading advisor if you have any questions.

This report is intended solely for distribution to customers of Capital Market Services, LLC. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, LLC with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, LLC accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Globicus International, Inc.

©2004-2010 Globicus International, Inc. and Capital Market Services, LLC.

A strong UK sales release and upbeat results about Euro-zone lending and money supply led a move in higher yielders and boosted “risk-on” trades. But, a weak US consumer confidence report took some of the momentum out of risk seeking behavior and caused the greenback to recoup some of its earlier losses.

Still, it was the second monthly increase in prices as the 10-city index rose 1.2% compared with April, and the 20-city index rose 1.3%. Adjusted for seasonal factors, both increased 0.5%. From a year earlier, the 10-city index rose 5.4%, and the 20-city reading climbed 4.6%. That was better than forecasts and should help the risk appetite momentum that has taken hold in equities and currency markets in the first half of this week.

Prior to April, the S&P index had declined for 6 straight months on a monthly basis. What the readings suggest then is that since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level.

This chart shows the index levels for the 10-city and 20-city composite indexes. As of May 2010, average home prices across the United States are back to the levels where they were in the autumn of 2003. Measured from June/July 2006 through May 2010, the peak-to-date figures for the 10-City
Composite and 20-City Composite are -29.6% and -29.1%, respectively.