Huge disappointment in the US: the economy grew by only 1.2% annualized. This comes on top of a downwards revised Q1 with 0.8% instead of 1.1%Â reported beforehand. Core PCE prices came out at 1.7% as expected but PCE missed with 1.9%. The deflator beat with 2.2%.Â
Among the components, personal consumption came out at 4.2%, within expectations. The silver lining can be a drop in inventories, but the headline is still very bad. Exports are up 1.4% and imports are down 0.4%, both better than in previous months. Another silver lining can come from government spending: it dropped by 0.9% after rising last quarter. So, growth was weak but due to falls in “bad growthâ€, inventories and government spending, while “good growthâ€, consumer spending was solid.
The US dollar is weakening
- EUR/USD is advancing towards 1.1160. Resistance awaits at 1.1190. Euro-zone inflation slightly beat expectations.
- GBP/USD is up to 1.3250
- USD/JPY is at 102.68, below the post-BOJ disappointment.
- USD/CAD is at 1.3095 despite weak Canadian GDP.
- AUD/USD is heading to 0.7580.
- NZD/USD shines with 0.7180, one of the biggest gainers of the day.
The US released its first GDP report for Q2 2016. Annualized growth was expected to rise by 2.6%, higher than 1.1% seen in Q1 and 1.4% in Q4 2015. Core PCE Prices were predicted 1.7% after 2% beforehand. Prices were expected to rise by 2% after 0.2% and the deflator carried expectations for a bump up of 1.8% after 0.4% beforehand.
See how to trade the US GDP with EUR/USD.
The Federal Reserve left its policy unchanged on Wednesday and there were no hints of a move in September. They probably had the GDP data in front of their eyes.
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