Summary:
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US GDP in the second quarter grew at pace of 4.1% YoY
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Reading for the 2017 revised lower
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EURUSD erased all of its intraday drop in the aftermath of the release
The major event of a day - US GDP report release - is already behind us. The headline reading disappointed a bit by coming 0.1 percentage point below median estimate. However, it should be noted that the reading for the previous year was revised lower. In turn we saw the USDIDX moving lower and EURUSD marching higher in the aftermath of the publication.
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US GDP jumped in the second quarter of the year but missed the expectations a little. Source: Macrobond, XTB Research
Median estimate of economists surveyed by Bloomberg agency suggested that the US economy grew at the pace of 4.2% YoY in the second quarter of the year. The actual reading missed this forecast by coming in at 4.1% YoY. However, this is still significantly higher than 3% YoY we saw in the second quarter of 2017. It was the fastest quarterly GDP growth in YoY terms since third quarter of 2014. Speaking of previous readings it should be noted that the GDP growth for the whole 2017 was revised lower from 2.3% to 2.2% with biggest downward revision seen in the fourth quarter (revised from 2.9% YoY to 2.3% YoY).
Taking a look at the details of the report one can see some promising figures. Namely, the personal consumption expenditures contributed the most to the US GDP growth in the second quarter of 2018. This is not surprising as it is usually the case. However, in the Q2 2018 this metric added 2.69 percentage points to the overall growth while it was just 1.95 pp year ago. Moving further the private investments subtracted 0.06 percentage points from the headline figure while they’ve added 0.95 pp in the previous year. After a few years of negative or nearly negative net exports contribution to the GDP growth we have seen a major improvement here. The net exports have added 1.06 pp to the GDP growth, the highest reading since the fourth quarter of 2013 (+1.23 pp). Government expenditures and investments added 0.37 percentage points against 0.01 percentage point addition in the previous year.
EURUSD erases whole intraday drop in the aftermath of the GDP report release. Source: xStation5
Not surprisingly, in the aftermath of the publication the USD moved lower against most of its major peers. Taking a look at the EURUSD H4 chart we can see that the main currency pair not only erased all of its intraday drop but even managed to grind above the yesterday’s close. The pair bounced from the 1.1620 handle and is moving higher towards the first relevant resistance zone ranging 1.1717-1.1745. A break above could pave the way towards the 1.1850 handle and could hint a possible euro recovery.
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