THE TAKEAWAY: USD GDP (Annualized) (4Q S) > +0.1% versus +0.5% expected, from -0.1% > Initial Jobless Claims (FEB 22) > 344K versus 360K expected, from 366K (revised from 362K) > USDJPY BULLISH
The first revision to the 4Q’12 GDP has come in worse than expected, but it still managed to squeeze out a small positive revision overall. The US economy grew by +0.1% at an annualized pace last quarter, short of the +0.5% forecast, according to a Bloomberg News survey, although it still improved from the initially reported -0.1% figure. Even as defense spending plunged by an annualized pace of -22.0% in the 4Q’12, the smaller trade deficit at $395.2B – the smallest since 1Q’10 – helped boost the second release of the GDP figure.
Preventing further gains in the revision, however, was the softer than forecasted and softer than prior Personal Consumption figure. Consumer purchases rose by +2.1% at an annualized pace, down from +2.2% initially reported, and below the +2.3% reading as projected by consensus forecasts. This revision is not surprising, however; it was clearly signaled that taxes would be hiked in 2013 as part of some resolution to the US fiscal cliff/slope, thus denting consumption expectations and forcing a higher rate of savings. Consumption is the most important part of the US headline GDP figure, accounting for nearly 75% of overall growth.
Also released at 08:30 EST/13:30 GMT was the weekly Initial Jobless Claims (FEB 22) print, which came in much better than expected (and well-below the prior figure; see above). Despite the budget sequester set to hit tomorrow, March 1, employers continue to add staff amid a generally improving US economy. The current rate of 344K suggests that the February Nonfarm Payrolls report, released on March 8, will show that the economy added somewhere between +145K and +160K jobs.
USDJPY 1-minute Chart: February 28, 2013
Charts Created using Marketscope – Prepared by Christopher Vecchio
Following the releases, the USDJPY dipped from 92.28 to 92.12, in what was undoubtedly a knee-jerk reaction to the disappointing headline GDP figure. However, in the context of the big picture – stronger than previously forecast growth, and continued improvement in the labor market – the USDJPY surged through its prerelease highs, to trade back up towards 92.40. Likewise, while the other major pairs – the AUDUSD, the EURUSD – initially pushed higher, US Dollar strength became apparent soon after.
--- Written by Christopher Vecchio, Currency Analyst
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