The advanced GDP reading for the U.S. is likely to reinforce a dour outlook for the world’s largest economy as economists forecast the annual rate of growth to contract 4.7 the first quarter, and economic activity is likely to remain subdued throughout the year as businesses continue to scale back on production and employment in an effort to reduce costs.
Trading the News: U.S. Gross Domestic Product (Annualized)
What’s Expected
Time of release: 04/29/2009 12:30 GMT, 08:30 EST
Primary Pair Impact : EURUSD
Expected: -4.7%
Previous: -6.3%
Impact the U.S. GDP has had on EURUSD over the last 2 quarters
4Q 2008 U.S. Gross Domestic Product
| The advance GDP reading for the U.S. showed that the world’s largest economy contracted at an annual pace of 3.8% in the fourth quarter to mark the biggest drop since 1982, and conditions are likely to get worse as the region faces its worst economic downturn in over a quarter century. A deeper look at the report showed personal consumption, which is one of the biggest drivers of growth, slipped 3.8% during the three-months to December, while business investments plunged 19.1% from the third quarter to post the biggest drop since 1975, and the data foreshadows a deepening recession in the U.S. as private-sector spending falters. As a result, the Federal Reserve is widely expected to hold the overnight lending rate at the record-low of 0.25% for some time, and announced that the central bank will utilize policy tools beyond the interest rate in an effort to stem the downside risks for growth and inflation. | |
3Q 2008 U.S. Gross Domestic Product
| Economic activity in the third quarter fell less than expected as the advanced GDP reading showed that the economy contracted 0.3% amid expectations for a 0.5% decline. The breakdown of the report showed that personal consumption slipped 3.1% from the previous quarter, which foreshadows a dour outlook for growth as private spending accounts for nearly two-thirds of the economy. As growth prospects deteriorates at a rapid pace, the U.S. economy may face its longest recession in over a quarter century, and may lead the FOMC to ease policy further in an effort to avoid a deep and severe downturn in the economy. Despite the enhanced reading for growth, the outlook remains bleak as credit conditions remain far from normal, and consumers are likely to curb spending in the months ahead as they continue to face falling home prices paired with financial uncertainties. | |
What To Look For Before The Release
Traders with access to market depth information via the FXCM Active Trader Platform may use it to gauge the potency of the economic data release as well as to shed some light on the market’s directional bias. Increasing volume ahead of the announcement will telegraph likely follow-through behind whatever move is to materialize, while an imbalance in available liquidity on the Bid versus the Offer side of the market will tell us the direction major institutions are likely favoring ahead of the announcement:
| Bullish Scenario:
If we see substantially deeper available liquidity on the Bid side of the market, this tells us that major price providers in the market are looking to buy the Euro against the US Dollar. Considering that close to 60% of all FX market volume is cleared through just six top banks, we see it prudent to be on the same side of the trade as major institutions and will favor a bullish bias on EURUSD ahead of the data release. | Bearish Scenario: |
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