Summary:
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US preliminary Q2 GDP: +4.2% vs +4.0% expected
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Second reading sees growth revised higher from 4.1%
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Muted market reaction with USD remaining higher on the day
The main economic release of the day from north America has caused barely a flicker as far as the market reaction is concerned, despite the latest US growth reading being revised higher when expectations were for a drop lower. In annualised terms the US preliminary GDP for the second quarter came in at +4.2%, above the +4.0% consensus forecast. The preliminary reading for this data point is actually the 2nd of 3, and the first reading (advance) showed a print of +4.1%. So against this backdrop, with the second reading showing an upwards revision compared to the expectation for a downward one, the date could be described as a positive surprise.
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Looking more closely at the breakdown of the GDP figures we can see that a big increase in personal consumption was one of the chief contributors to the rise in the overall number. Net exports also chipped in, making one of their largest contributions in several years. Source: XTB Macrobond
Given the upbeat growth data the market reaction has been disappointingly muted, although it should be pointed out that second readings of GDP numbers rarely spark substantial moves. This is due in part to the first reading naturally stealing the spotlight and also down to the difference from the reading being only 0.1%. In addition it should be remembered that the data refers to the second quarter which ended almost 2 months ago, so there is a significant lag.
The USD remains higher on the day but if truth be told nearly all these gains occurred before the data was released and since then there’s been only a small further advance for the greenback. Source: xStation
Looking at USD pairs, we pointed out that the USDCAD had made a potentially significant break lower yesterday in moving below 1.2985, and the pair remains below this potentially key level which could now be seen to possibly offer resistance. Elsewhere the USDJPY could be poised for a decent move, with the market looking to break out after a period of consolidation. Price has formed a bull flag of sorts and in the last 4 hours moved above a falling trendline from the 11.48 level, but its not until the market clears this hurdle that a further extension higher can occur. 110.94 has provided support of late and is a region to keep an eye on should price pull back.
USDJPY is moving higher today and looking to break higher after a recent period of consolidation that could be characterised as a bull flag. The market has breached a falling trendline but needs to get above 111.48 before a sizable rally can occur. Source: xStation
