Final revisions to initial dollar data came in worse than previous
estimates, with original numbers being revised lower from 2.9% YoY growth to
2.6%. Also printing lower, the Core PCE — the Fed's preferred measure of
inflation — was quoted lower to 2.7% in the 2Q, 2006. This was in contrast to
the GDP Price Index and Personal Consumption, which both stayed the same from
their initial estimates.
Clearly, the GDP being revised lower bodes poorly for the US dollar, with
US growth in the second quarter now worse than we previously thought. Likewise,
Core PCE's downward revision may spook Fed watchers who expected the key
inflation measure to stay the same. Though the revisions in the data may not be
enough to materially sway the Fed's bias, the lower growth may later
reflect itself in downward revisions of other key economic numbers.
Still, traders seemed relatively unfazed by the mediocre results, with the
EURUSD actually down approximately 20 points following the release.
- David Rodriguez
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