How Can Today’s US GDP Affect The Dollar?

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About the US GDP

The Gross Domestic Product quarterly report is released by the US Bureau of Economic Analysis shows the monetary value of all the goods, services and structures produced within the US economy in a given period of time. Generally speaking, a high reading or a better than expected number is seen as positive for the USD, while a low reading is seen as negative and can cause the USD to tumble.

 

Adjusted for Inflation

It is important to keep in mind that the GDP figures as reported to investors are already adjusted for inflation. In other words, if the gross GDP was calculated to be 6% higher than the previous year, but inflation measured 2% over the same period, GDP growth would be reported as 4% or the net growth over the period.

 

When is it released?

GDP data are released monthly. There are 3 versions of GDP released a month apart – Advance, second release and Final. Both the advance the second release are tagged as preliminary in the economic calendar. This Friday we expect a preliminary GDP release for the first quarter of 2019 at 12:30 GMT.

 

Expectations and Forecasts

Depending upon where you look, estimates for this Friday’s preliminary US Q1 GDP vary. The New York Nowcast estimate for Q1’19 US GDP is only at 1.4%, while the Atlanta Fed GDPNow model is pointing at 2.8% growth. The Bloomberg News survey is calling for US GDP to come in at 2.2% annualized. Regardless, it does appear that any near-term concerns about the US economy dipping into a recession were overblown, the US government shutdown impact was limited, and the Fed isn’t likely to cut rates anytime soon.

For much of the first quarter, there was great concern that the US government shutdown between December 23 and January 25 would have a significant negative impact on Q1’19 US GDP. And while the Congressional Budget Office estimated that a net $3 billion in wages would be lost, ultimately, it appears that the underlying strength of the US economy will prevail.

 

What would a strong Q1 GDP mean for the USD?

Given rising European growth concerns, a strong Q1’19 US GDP report could push the US Dollar even higher against its rivals. A strong GDP would also suggest that the Federal Reserve may abandon its neutral stance and point to a more hawkish future monetary outlook at its next Interest Rate Decision meeting on Wednesday, May 1st.

 

Sources: Investing, DailyFX, Investopedia, FXStreet | April 24, 14:00 PM GMT

 

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