Trading the News: U.S. Gross Domestic Product (GDP)
The advance U.S. Gross Domestic Product (GDP) report may push EUR/USD towards the monthly-high (1.1489) as the growth rate is expected to slow to 2.2% from 3.4% per annum in the third-quarter of 2018.
A marked slowdown in economic activity is likely to drag on the U.S. dollar as the Federal Reserve alters the forward-guidance for monetary policy, and fears of a looming recession may push the central bank to adopt a more neutral tone over the coming months as Chairman Jerome Powell states that ‘the Committee can now evaluate the appropriate timing and approach for the end of balance sheet runoff.’
In turn, a dismal U.S. GDP print may spark a bullish reaction in EUR/USD as Federal Open Market Committee (FOMC) prepares to taper the $50B/month in quantitative tightening (QT), but another 1.6% reading for the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may boost the appeal of the greenback as it puts pressure on the central bank to further normalize monetary policy. Sign up and join DailyFX Currency Analyst David Song LIVE to cover the fresh updates to the U.S. GDP report.
Impact that the U.S. GDP report had on EUR/USD during the previous release
| Period | Data Released | Estimate | Actual | Pips Change | Pips Change |
|---|---|---|---|---|---|
3Q A 2018 | 10/26/2018 12:30:00 GMT | 3.3% | 3.5% | +13 | +60 |
3Q 2018 U.S. Gross Domestic Product (GDP)
EUR/USD 15-Minute Chart
The U.S. economy grew 3.5% per annum in the third-quarter of 2018 after expanding 4.2% during the three-months through June, with Personal Consumption increasing 4.0% amid forecasts for a 3.3% print. However, a deeper look at the report showed the core Personal Consumption Expenditure (PCE), the Federal Reserve’s preferred gauge for inflation, narrowing to 1.6% from 2.1% in the third-quarter.
The U.S. dollar struggled to hold its ground following the mixed data prints, with EUR/USD grinding higher throughout the day to close at 1.1403. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.
EUR/USD Daily Chart
- The upper bounds of the near-term range is in focus for EUR/USD as the 1.1220 (7.86% retracement) area provides support, with a close above the 1.1390 (61.8% retracement) to 1.1400 (50% expansion) region raising the risk for a move towards 1.1510 (38.2% expansion).
- Next area of interest comes in around 1.1640 (23.6% expansion) to 1.1680 (50% retracement) followed by 1.1810 (61.8% retracement), which largely lines up with the September-high (1.1815).
For more in-depth analysis, check out the 1Q 2019 Forecast for EUR/USD
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--- Written by David Song, Currency Analyst
Follow me on Twitter at @DavidJSong.
