The second release of US GDP for Q2 was revised down to to an annual pace of 1%. This is lower than 1.1% that was expected and lower than 1.3% initially announced. The weak, almost non-existent growth has a limited impact on currencies. The only currency to move significantly is USD/CAD. Canada is very dependent on the US.
The moves are quite limited, due to the wait for Bernanke.
USD/CAD rose to resistance at 0.9913. It extended gains made earlier. Further resistance is at around 0.9977 before parity. Support is at 0.9850. For more on the pair, see the Canadian dollar forecast.
The Core PCE Index is now rising by 2.2%. This is one of the important measures of the Fed for inflation. The relatively strong inflation lowers the chances for QE3.
The euro and other “risk” currencies were weakening before the event, while the Japanese yen was on the rise – classic “risk aversion”.
The markets are very tense towards the speech of Ben Bernanke in Jackson Hole. Some had expected that the chairman of the Federal Reserve will hint about another round of quantitative easing (QE3), but these expectations have decreased towards the release.
For all the options for Bernanke, see the 7 Scenarios for Jackson Hole.
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