US stocks clawed back some early losses to finish the day flat but the big story in US trading was the USD rally on the back of today’s Q2 GDP report. Although headline growth of 2.3% came in a bit short of expectations, it was more than offset by a big upward revision to Q1 GDP back well up into positive territory. In addition, consumer spending remained strong and core PCE inflation, a measure the Fed uses, rose to 1.8% above street expectations and close to the Fed’s 2.0% medium term target. Overall, the street saw the GDP report as increasing pressure on the Fed to start raising interest rates in September and then raise at a slower pace with the risk growing that if the central bank waits much longer it could get behind the curve (again) and then have to raise at a faster pace. This provided an early headwind for stocks and a big tailwind for USD which gained against all other majors. The worst performer on the day was NZD which continued to tumble from yesterday’s weak building permits. CAD fell ahead of tomorrow’s Canadian GDP report for May with traders still wondering what the Bank of Canada saw to prompt its recent interest rate cut. EUR also turned sharply downward after the IMF indicated that because of Greece’s financial condition it cannot participate in a third bailout. This increased the risk that Eurozone uncertainty could remain elevated for a long time to come. It’s also possible, however that this could be the IMF using this leverage to put pressure on Germany to agree to the debt reduction the IMF has recommended. Either way, it looks like the relief phase from the last Greek deal has ended and more volatility (and trading opportunities) could be ahead. Interestingly the three majors down the least against the greenback today were JPY, AUD and GBP all of which have central bank meetings next week. The Bank of England appears to be inching toward its own rate hikes perhaps early next year. The RBA is expected to remain on hold and the way AUD is acting relative to NZD traders seem to expect the RBNZ as more likely to be the next to cut. The Bank of Japan is expected to continue its QE program but there have been rumblings that it could start to taper in the coming months and that at a minimum an increase to QE looks pretty unlikely. Today’s Japanese economic reports could give a better idea on which way the economy and inflation are heading. Chinese markets may also be active once again as traders try to figure out if current consolidation is actual base building shored up by government intervention or a pause within a potentially bigger downtrend. Corporate News Amgen $2.57 vs street $2.43, raises full year guidance to $9.55-$9.80 from $9.35-$9.65 Electronic Arts $0.15 vs street $0.02, sales $693M vs street $653M, guides next Q to $0.40 below street $0.67 Western Union $0.41 vs street $0.39, raises full year guidance to $1.60-$1.67 from $1.58-$1.62 Economic News Significant announcements released overnight include: US Q2 GDP 2.3% vs street 2.5% US Q1 GDP revised upward to 0.6% from (0.2%) US Q2 personal consumption 2.9% vs street 2.7% US Q2 core PCE inflation 1.8% vs street 1.6% US jobless claims 267K vs street 270K Germany unemployment change 9K vs street (5K) Germany unemployment rate 6.4% as expected Germany consumer prices street 0.1% Spain GDP 3.1% as expected Spain consumer prices 0.0% as expected Sweden GDP 3.0% vs street 2.5% Norway retail sales 1.0% vs street 0.8% Brazil interest rate surprise 0.50% increase to 14.25% Upcoming significant announcements include: 9:30 am AEST Japan unemployment rate street 3.3% 9:30 am AEST Japan consumer prices street 0.3% 3:00 pm AEST Japan housing starts street 3.0% 3:00 pm AEST Japan construction orders previous (7.4%) 11:00 am AEST NZ ANZ activity outlook previous 23.6 11:00 am AEST NZ ANZ business confidence previous (2.3) 11:30 am AEST Australia producer prices previous 0.7% 7:00 am BST Germany retail sales street 4.0% 9:00 am BST Norway unemployment rate street 3.0% 9:00 am BST Italy unemployment rate street 12.3% 10:00 am BST Eurozone unemployment rate street 11.0% 10:00 am BST Eurozone consumer prices street 0.2% 10:00 am BST Eurozone core CPI street 0.8% 10:00 am BST Greece retail sales previous (3.3%) 8:30 am EDT Canada May GDP street 0.8% 8:30 am EDT US Q2 employment cost index street 0.6% 9:45 am EDT US Chicago PMI street 50.8 10:00 am EDT US UMichigan consumer sentiment street 94.0 10:00 am EDT US UMichigan 1 yr inflation estimate previous 2.8% 1:00 pm EDT US Baker Hughes drill rig count previous 876 CMC Markets is an execution only service provider. 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