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THE TAKEAWAY: US economy has been growing faster than expected > 1Q’13 revised down, but 2Q’13 beats expectations – the economy is now seen as expanding, not contracting > USDJPY BULLISH

The US Dollar has extended its gains this morning on the back of a stronger than anticipated 2Q’13 US GDP report, alongside several other revisions that saw growth come in higher than previously reported over the past several years. The +1.7% annualized reading, in context of the now +0.1% 4Q’12 print and +1.1% 1Q’13 GDP print, shows that the US economy’s growth is accelerating despite fiscal headwinds.

Here are the key figures driving US Dollar strength ahead of the US cash equity open:

- GDP (2Q A) (Annualized): +1.7% versus +1.0% expected, from +1.1% (revised lower from +1.8%)

- Personal Consumption (2Q A): +1.8% versus +1.6% expected, from +2.3% (revised lower from +2.6%) (y/y)

- GDP Price Index (2Q A): +0.7% versus +1.0% expected, from +1.3% (revised higher from +1.2%) (y/y)

- Average GDP growth from 2009 to 2012: +2.4% (revised higher from +2.1%)

USDJPY 1-minute Chart: July 31, 2013

US_Dollar_Surges_After_2Q13_GDP_Bests_Estimates_USDJPY_at_Highs_body_x0000_i1027.png, US Dollar Surges as GDP Beats Ahead of Fed Meeting; USD/JPY New Highs

Charts Created using Marketscopeprepared by Christopher Vecchio

Following the release, the USDJPY, already boosted by the beat on the July ADP jobs report, rallied from ¥98.13 to as high as 98.52, a fresh session high and highest level of the week. The pair remains well-bid from just an hour earlier in the session, when the USDJPY was near the lows under 97.60.

Volatility around the Fed release later today will be high and thus the gains seen this morning may or may not be sustained. Currency Analyst David Song has detailed his outlook for the FOMC later today, while Chief Currency Strategist John Kicklighter will be hosting a webinar in DailyFX Plus at 13:45 EDT/17:45 GMT to cover the event.

--- Written by Christopher Vecchio, Currency Analyst

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