subject: U.S. GDP Advances 2.0 Percent in the Third Quarter, Currency Markets Show Muted Reaction [print this page] U.S. GDP Advances 2.0 Percent in the Third Quarter, Currency Markets Show Muted Reaction
Economic activity in the world's largest economy rose 2.0 percent after climbing 1.7 percent the quarter prior, while the personal consumption report topped expectations during the same period. It is noteworthy that investment growth slowed, while consumer spending pushed higher. Indeed, today's increase came on the back of weakness in imports, and stronger growth in business spending. There was a muted reaction subsequent to the release as traders digested the report and its implications with regards to quantitative easing. Focus now turns to the FOMC rate decision and the nonfarm payrolls report which will be released next week on November 3rd and 5th respectively
All in all, the recovery in the U.S. continues to gather pace, but not enough to impact the labor market as growth is largely due to federal spending. This is worrisome because these measures will be coming to a halt, and businesses are too weak to sustain the recovery. Thus, I do not rule out the unemployment rate pushing higher, which in turn gives partial reason for for another round of quantitative easing.
U.S. GDP
Source: Bloomberg
Taking a look at the currency markets, the EURUSD pushed higher immediately after the in line reading, but upside risks look to remain capped by the key 1.40. As of late, technical indicators continue to point to the downside; the pair looks poised to close above the 200-day moving average on the weekly chart, which is concerning for the greenback. Next week's close will provide a more in depth outlook for EURUSD price action.
EURUSD Daily Chart
Source: Bloomberg Prepared by Michael Wright
Written by Michael Wright, Currency AnalystTo Receive Future Articles by Email, Please contact me at mwright@fxcm.comMichael Wright is the author of FX Headlines, Fundamentals vs. Technical's, Weekly Spotlight, and Forex Trading Weekly Forecast
