The good news from the US keeps on flowing: Q2 GDP was revised up to the magic number of 3% annualized. President Trump will probably take a victory lap on this number.
The US dollar extends its gains
- EUR/USD slips under the 1.19 level, completing a big U-turn from the highs.
- USD/JPY extends its gains to 110.40. The pair broke above downtrend resistance earlier in the day.
- GBP/USD is below 1.29, showing us once again: Brexit is worse than Trump.
- USD/CAD is around 1.2565.
- AUD/USD is down under at 0.7925.
Among the details: personal consumption is up to 3.3% from 2.8%. The GDP prices index remains at 1% and core PCE at 0.9%. Markets prefer growth in consumption. Exports were revised down to 3.7% and imports down to 1.6%. However, inventories also pull growth lower. This implies that they will contribute to growth later on.
However, inventories also pull growth lower. This implies that they will contribute to growth later on. Corporate profits are up 0.8% against a drop of 2.6% beforehand.
GDP Background
The US was expected to upgrade the GDP assessment for the second quarter of 2017 from 2.6% to 2.7% annualized. This is the second release out of three. Growth has picked up in the second quarter, after a very slow Q1 and a mediocre 2016. 2-2.5% is considered the “New Normalâ€.
The US dollar was on the rise, recovering from the blows it had suffered earlier. The most recent boost for the greenback came from the ADP report, which showed a whopping gain of 237K jobs. This was significantly better than expected and accompanied by an upwards revision.
Components of GDP growth are also important. Consumption and investment are considered “good growthâ€, coming from the primary sources and providing the future potential for further expansion. On the other hand, government expenditure is seen as negative. Inventory growth is a double-edged sword: replenishing of inventories now implies depleting them later on.
Preview: 5 reasons why this NFP could be very volatile.
