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The second read of third-quarter GDP is set to confirm a surge of 33.1% annualized. Economists may be overly cautious to project a mere confirmation of third-quarter growth, and there is room for an upside surprise. However, timing and other factors may limit the impact on the dollar, according to FXStreet’s Analyst Yohay Elam.

Key quotes

“The US economy rebounded from the coronavirus-related coma in the second quarter and roared by 33.1% annualized according to the first release. Economists expect the second estimate to confirm the first one, yet there are reasons to expect an upside surprise. First, recent economic figures beat estimates – and that includes GDP releases. Secondly, incoming data such as Factory Orders and Personal Income for September beat expectations. Thirdly, German growth figures were upgraded to the upside, from 8.2% to 8.5% quarterly. The roaring back of the global economy from the covid freeze may have been underestimated.”

“Markets witnessed a ‘calendar comeback’ on Monday, as Markit’s robust Purchasing Managers’ Indexes figures triggering a rally in the dollar. It is uncommon to see second-tier statistics having such an impact. However, that may have been a one-off event. Moreover, Markit’s data is for November while GDP refers to the three months ending in September. Perhaps most importantly, GDP figures face fierce competition with other releases.” 

“Thursday’s Thanksgiving holiday has compressed several other publications to Wednesday. These include Durable Goods Orders for October and Personal Income for October and weekly Unemployment Claims. Therefore, it would take a substantial upside surprise – perhaps annualized GDP growth of 34% or higher – to boost the greenback, while a smaller upgrade would probably be shrugged off by investors. Conversely, a downfall to around 32% would probably weigh on the world’s reserve currency.”


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