This helps to explain the mixed reactions from the markets, as US stock market futures surged at 8:30 ET, immediately pulled back, and then slowly climbed into positive territory by 9:00 ET. The same goes for the USD/JPY, and the impact of this report on risk sentiment will be crucial to where the forex markets go next. As it stands, USD/JPY seems more likely to fall toward the bottom of its recent range at 89.00, suggesting other "risky" assets could decline as well.
Source: FXTrek Intellicharts
Focusing back on the data, the decline in GDP could be attributed to a variety of factors, including a 3.5 percent drop in personal consumption, a 12.3 percent decline in gross private investment, and a 19.7 percent plunge in exports. We already know that the US has been in recession since December 2007, per the National Bureau of Economic Research (NBER), but one of the bigger questions now is how long the recession will last for. It will be important to watch gauges of employment and business activity for the early months of 2009, as the latest trends suggest that GDP could continue to fall sharply in Q1 and Q2. Also worth keeping in mind that today's GDP report is simply the advanced reading, and with two more revisions due out on February 27 (preliminary) and March 26 (final), these figures could ultimately change dramatically.
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