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US GDP badly disappoints with 1.2% – USD crashes

Huge disappointment in the US: the economy grew by only 1.2% annualized. This comes on top of a downwards revised Q1 with 0.8% instead of 1.1%  reported beforehand. Core PCE prices came out at 1.7% as expected but PCE missed with 1.9%. The deflator beat with 2.2%.  

Among the components, personal consumption came out at 4.2%, within expectations. The silver lining can be a drop in inventories, but the headline is still very bad. Exports are up 1.4% and imports are down 0.4%, both better than in previous months. Another silver lining can come from government spending: it dropped by 0.9% after rising last quarter. So,  growth was weak but due to falls in “bad growth”, inventories and government spending, while “good growth”, consumer spending was solid.

The US dollar is weakening

EURUSD rising post US GDP July 29 2016

The US released its first GDP report for Q2 2016. Annualized growth was expected to rise by 2.6%, higher than 1.1% seen in Q1 and 1.4% in Q4 2015. Core PCE Prices were  predicted 1.7% after 2% beforehand.  Prices were expected to rise by 2% after 0.2% and the deflator  carried expectations for a bump up of 1.8% after 0.4% beforehand.

See how to trade  the US GDP with EUR/USD.

The Federal Reserve left its policy unchanged on Wednesday and there were no hints of a move in September. They probably had the GDP data in front of their eyes.

You can watch the live coverage with Valeria Bednarki  and Mauricio Carrillo here:

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.