At 13:30pm, on Friday April 26th, the latest GDP growth data, relating to the USA economy, will be published. The annualised quarter on quarter figure, for the first quarter of 2019, is forecast by agencies such as Bloomberg and Reuters, to come in at 2.2%, registering no change from the level recorded for Q4 2018.
However, the GDP rate had fallen from the previous 3.4% to 2.2%, a significant fall blamed on the ripple effect, caused by the collapse in USA equity markets in the final two quarters of 2018, and the temporary, but modern day record long, government shut down in February. On a year on year basis; quarter 4 2018 versus quarter 4 2017, the current GDP rate is recorded at 3%.
The predictions from various agencies of no change, after they’ve polled their panels of economists, are based on the various key metrics on the USA recording relatively benign results over recent months. Inflation is currently running at 1.8%, unemployment is at close to modern day record lows, with weekly jobless claims at close on record lows, whilst USA equity markets are printing record highs during recent sessions, as overall investor sentiment increases. The FOMC/Fed recently delivered a positive report on the performance of the U.K. economy, neither dovish or hawkish, but offering up no clues with regards to a rise of the key interest rate, above its current level of 2.5%.
The USA GDP release is highlighted as a high impact economic calendar event, due to its power and ability to move the markets in: USA equity markets, the U.S. dollar and various commodities. Therefore, FX traders who trade USD exclusively, or who prefer to concentrate on trading economic events and releases, should ensure they’re in a position to trade the event and just as importantly, trade the reaction the event.
USD has experienced significant appreciation during the current week’s trading sessions, at 12:30pm U.K. time on Thursday April 25th, USD was up circa 1% versus GBP and EUR, and up 2.1% versus AUD, when measured on a weekly basis. The dollar index, DXY, was trading up 0.13% on Thursday, up 0.84% weekly, whilst reaching 98.30, a high not witnessed since May 2017, a close on two year high.
Not only does the dollar index reveal the strength of sentiment which currently exists in USD, it also illustrates the impact the discrepancy between various central banks’ interest rate setting policy can have. At 2.5%, the FOMC rate is significantly out of step versus that of other central banks, ergo USD has risen sharply over recent months. That value may be tested, if the latest GDP figures reveal a fall.
« Yen rises versus the majority of peers, as BOJ keeps key interest rate at -0.1%, U.S. dollar maintains recent heights, as FX traders turn their focus to Friday’s GDP data. USA equity markets whipsaw in wider ranges, as certain data and earnings miss forecasts, JPY maintains gains based on BOJ economic outlook. »