MARKETS SPECTATOR: GDP preview
The market looks to be positioned on the short side going into today's GDP print, despite forecasts for fairly robust growth.
Following the much stronger-than-expected Q1 GDP print of 1.3 per cent, versus expectations of 0.5 per cent per cent, the market is forecasting fairly robust growth of 0.8 per cent despite all the negative headlines of the last few months. So in terms of a market reaction, today’s release could be quite interesting.
Based on the recent weakness, perhaps the market is betting a somewhat softer number. If this proves correct, the question will be how big a miss it is versus forecasts. A much worse-than-expected figure is likely to attract further selling pressure but a smaller miss may not see much of a response to the downside, given that a lot of traders are already short. In fact, we may even see some short covering as their predictions don’t play out.
On the flipside and given the selling the Aussie has seen recently, any release in line with expectations or better could easily see a sharp short covering rally as those participants already short look to quickly buy back their positions amidst a bag of new buy orders.