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US Q2 GDP overview

Thursday’s US economic docket highlights the release of the Advance Q2 GDP report, scheduled at 12:30 GMT. The preliminary number is expected to show that the world’s largest economy expanded by 31% annualized pace during the third quarter of 2020. Joseph Trevisani, Senior Analyst at FXStreet explains: “The rapid expected recovery in GDP in the third quarter has been driven by a quick return of consumer and business spending.”

How could it affect the S&P 500?

The market might have already priced in a strong recovery. Moreover, the key focus remains on developments surrounding the coronavirus saga and the potential economic impact of renewed lockdown measures. Hence, the reaction to the data is more likely to remain muted, unless there is significant divergence from the expected readings. As Joseph further added: Equities and the credit markets will respond in a linear fashion in either direction as GDP deviates from the forecast.”

From a technical perspective, the S&P 500 Index has slipped below 100-day SMA for the first time since May and seems vulnerable to slide further. A disappointing reading would be enough to dampen the already weaker market mood and drag the index to test sub-3,200 levels. Conversely, a stronger reading might provide a minor lift, though any meaningful upside is more likely to remain capped near the 3,300 mark amid the uncertainty over the outcome of the US presidential election next week.

Key Notes:

   •  US Third Quarter GDP Preview: Must what goes down, come up?

   •  S&P 500: Downside target 3150

   •  Breakout trading to ride on the downtrend – S&P 500 day trading

Description

The Gross Domestic Product Annualized released by the US Bureau of Economic Analysis shows the monetary value of all the goods, services and structures produced within a country in a given period of time. GDP Annualized is a gross measure of market activity because it indicates the pace at which a country’s economy is growing or decreasing. Generally speaking, a high reading or a better than expected number is seen as positive for equities, while a low reading is negative.