US GDP growth was revised down to 2.4% (annualized), a bit below expectations. The US was expected to report a downwards revision of Q4 2013 GDP down from 3.2% originally reported to 2.5% at the second estimate. A third and final release is scheduled. Since the first estimate, more data for the fourth quarter was published, and it pointed to a weaker number now.
Before the release, the US dollar was somewhat on the back foot, especially against the surging euro. EUR/USD traded above 1.38, GBP/USD around 1.6715 and USD/JPY was steady at 101.85. The US dollar is marginally stronger after the publication. Since the overall number is not too bad, it seems that the better composition of growth allows for profit taking.
Personal consumption got a big downwards revision, while business spending was actually revised to the upside. The GDP price index was revised to the upside, from 1.3% to 1.6%. This is an indicator that US inflation is still positive.
GDP consists of consumption, government spending, investment and exports minus imports. The latter, reflected in trade balance publications, has leaned lower, leading to the weaker expectations.
Earlier, we had a big surprise from Europe: euro-zone inflation stronger than expected, sending EUR/USD to a two month high above 1.38.
Canada also releases its GDP at the same time and it also came mixed: a drop in December but a strong y/y rise of 2.9%. USD/CAD falls on the positive Canadian yearly growth.
The day is far from over, as we have three more meaningful releases: the Chicago PMI, revised consumer sentiment from the UoM and pending home sales.
Further reading: What Yellen’s New Office Means for Forex Traders
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