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Dismal Revisions to 4Q U.S. GDP Report to Curb EUR/USD Losses

Dismal Revisions to 4Q U.S. GDP Report to Curb EUR/USD Losses

David Song, Strategist

- Preliminary 4Q U.S. Gross Domestic Product (GDP) Report to Show Downward Revision in Growth Rate, Economy to Expand Annualized 2.5%.

- Personal Consumption to Expand 3.6% Versus Initial Forecast of 2.6%, Core Personal Consumption Expenditure to Hold Steady at 1.9% per Annum.

Trading the News: U.S. Gross Domestic Product (GDP)

DailyFX Calendar

Updates to the 4Q U.S. Gross Domestic Product (GDP) report may curtail the recent decline in EUR/USD as the growth rate is expected to narrow to an annualized 3.6% from an initial print of 3.8%.

Atlanta Fed GDP Now Estimate

Keep in mind, the stale data may do little to alter the U.S. monetary policy outlook as the Federal Open Market Committee (FOMC) appears to be on course to implement higher borrowing-costs in 2018, and the central bank looks poised to deliver a 25bp rate-hike in March as Fed Chairman Jerome Powell insists ‘further gradual increases in the federal funds rate will best promote attainment of both of our objectives.

However, another set of lackluster data prints may spark a bearish reaction in the greenback as it limits the FOMC’s scope to expedite the hiking-cycle, and central bank officials may continue to forecast a neutral Fed Funds rate around 2.75% to 3.00% as a few ‘participants pointed to the record of inflation consistently running below the Committee's 2 percent objective over recent years and expressed the concern that longer-run inflation expectations may have slipped below levels consistent with that objective.'

Impact that the U.S. GDP report has had on EUR/USD during the previous quarter

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

3Q P

2017

11/29/2017 13:30 GMT

3.2%

3.3%

+12

+22

Preliminary 3Q 2017 U.S. Gross Domestic Product (GDP)

EUR/USD 15-Minute Chart

EUR/USD 15-Minute Chart

The preliminary 3Q Gross Domestic Product (GDP) report showed an upward revision in the growth rate, with the U.S. economy expanding an annualized 3.3% versus an initial print of 3.0%.At the same time, the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation unexpectedly climbed to 1.4% from an advanced reading of 1.3%, while Personal Consumption increased 2.3% during the same period amid forecasts for a 2.5% rise.

The minor adjustments failed to prop up the greenback, EUR/USD grinding higher throughout the day to close the session at 1.1847. New to trading? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

EUR/USD Daily Chart

EUR/USD Daily Chart

For additional resources, download and review the FREE DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

  • EUR/USD stands at risk for further losses as it snaps the narrow range carried over from the previous week, with the near-term outlook capped by the 1.2320 (23.6% retracement) to 1.2370 (61.8% expansion) region.
  • The Relative Strength Index (RSI) continues to deviate with price, with the oscillator still tracking the bearish formation from earlier this month.
  • Break/close below 1.2230 (50% retracement) raises the risk for a move back towards 1.2130 (50% retracement), with the next downside hurdle coming in around 1.1960 (38.2% retracement) to 1.1970 (23.6% expansion).

Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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