The US economy grew at an annualized rate of 1.5%, within expectations of 1.6%. This is also a balanced figure considering the weaker Atlanta Fed GDP Now measure and the higher estimates following the Fed. Inventories erased 1.4% from growth. These inventories need to be replenished that could lead to a rebound in Q4.
EUR/USD ticks higher initially and also other currencies are making small gains against the greenback. There doesn’t seem to be real enthusiasm to sell the dollar after yesterday’s hawkish Fed decision. Update: the greenback is now strengthening after the initial dip.
Among the details we have consumer spending up 3.2% annualized, sales +3%, durables up 6.7% and business investment up 2.1%. It seems that inventories are down, and that’s not a bad thing.
The United States was expected to report an annualized growth rate of 1.6% in Q3 in the first release, significantly below 3.9% in Q2. However, the Atlanta Fed GDP Now model pointed to only 1.1%, while the upbeat Fed decision implied better figures.
The US dollar was slipping from the highs before the release:
The data (updated)
- Q3 GDP: exp. 1.6%. Actual: 1.5%.
- Core PCE Prices exp. 1.4% after 1.9%. Actual: 1.3%.
- PCE Prices exp. 3.2% after 2.2%. Actual 1.2%.
- GDP Deflator exp. 1.5% after 2.1%. Actual 1.2%.
- Weekly jobless claims, exp. 263K after 259K beforehand. Actual 260K.
- Weekly continued claims exp. 2.16 million after 2.17 beforehand. Actual 2.144 million.
Currencies
- EUR/USD recovered and got closer to 1.10 and settled at 1.0960 on upbeat German state inflation numbers. The pair advanced to 1.0970 before dropping below 1.0950.
- GBP/USD traded steadily at around 1.5260. and is around these levels.
- USD/JPY was flirting with 121 ahead of the important BOJ decision tomorrow morning.
- USD/CAD was looking for a new direction around 1.32. Canadian producer prices were published at the same time and is a bit higher.
- AUD/USD was still pressured under 0.71 on Chinese worries, the 6.53% expected growth rate. The Aussie is slightly lower at 0.7087.
- NZD/USD battled 0.67 after the dovish RBNZ decision. The pair slips under this level.
Background
After a series of weaker than expected numbers, such as retail sales, durable goods orders and others, significantly slower growth was expected. It is important to remember that this is only the first release and more two more will come. The revisions can be huge.
Yesterday, the Fed acknowledged some weakness in the economy but remained upbeat for the medium term. In addition, they added a hint about a hike in December. The relatively positive statement and the high probability that the Fed had the GDP numbers before its eyes led us to speculate on a stronger figure than 1.6% expected.
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