GDP for the third quarter is 2% (annually), within expectations. The immediate reaction is a weaker dollar, as the number is still relatively low – showing that serious QE is needed.
Early expectations stood on an annual rise of 2.1%. The problem for the dollar is not that small miss of expectations, but that the figure and the expectations are both weak. EUR/USD rose from 1.3850 to 1.3880, USD/JPY dropped to 80.65, GBP/USD pushes towards 1.60 and AUD/USD managed to climb above the 0.9750 resistance line. All the moves are currently limited – no huge jumps.
This GDP figure is heavily weighed by the members of the FOMC, that will meet next week to decide about the size of the quantitative easing program – known as QE2, or the big dollar printing program. This program sent the dollar down in the past two months, as dollar printing devalues the currency.
In recent weeks, the dollar stabilized, as the QE program was already priced in, and the greenback moved on speculations about the size of the program. The motivation was a weak economy, with a high unemployment rate. GDP is a wide measure of the economy, with a time span of 3 months, making the release important.
This is the first release of GDP for the third quarter. In Q2, the initial figure underwent a very significant revision afterwards. The big change is due to the fact that the government lacks an important portion of data before the first Advance GDP.
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