Commodity Currencies Up After US GDP Revision; USDJPY Inches Higher
Growth in the United States continued to slow in the second quarter, data released from the Commerce Department revealed, though not as slow as originally expected. The revision of the second quarter Gross Domestic Product figure for the world’s largest economy showed that output came in at an annualized rate of +1.7%, slightly higher than the +1.5% rate originally reported.
Mainly, an improvement in the trade deficit as well as household consumption boosted the headline growth reading, while the weakest pace of investment in new equipment by corporations in nearly three-years weighed on the figure, according to Bloomberg News. As the labor market slowly heals and the housing sector remains depressed, consumers have pared back spending to more modest levels, also weighing on the economic output. Consumption, as the largest component of growth at nearly 75%, is crucial to the US economy; Personal Consumption rose by +1.7% versus +1.5% expected on an annualized-basis.
USDJPY 1-minute Chart: August 29, 2012
Charts Created using Marketscope – Prepared by Christopher Vecchio
In reaction to the news, the US Dollar strengthened across the board momentarily, before the commodity currencies, the Australian, New Zealand, and Canadian Dollars started posting gains on the stronger growth data. However, the key indicators for the strength of the US Dollar, Gold and the Japanese Yen, started moving in opposite directions. Whereas Gold gained, the Yen fell; the USDJPY moved higher from 78.58 to as high as 78.66, at the time this report was written [UPDATE 14:21 GMT: the USDJPY has continued to move higher and is now trading at 78.71]. Considering that the actual print came in line with expectations, we do not think that this dramatically alters the likelihood of more quantitative easing from the Federal Reserve, which will be a key sticking point this week at the Jackson Hole Economic Policy Symposium.
--- Written by Christopher Vecchio, Currency Analyst
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