Tomorrow the advanced version of the US 3rd quarter GDP is expected to be released at 12:30 GMT. The GDP is the annualized change in the inflation-adjusted value of all goods and services produced by the economy. The GDP estimate is the first of three for the quarter, with the other releases scheduled in November and December when more information becomes available. Being the earliest, the Advance release tends to provide the most market volatility for the USD and its crosses.
The GDP data will be the most watched economic report of the week. The expectation is for a slight recovery from the previous quarter, with an expectation of 2.1% growth, an improvement from the 1.7% of the previous quarter. The rise in growth for this quarter is largely attributed to higher consumer spending. The GDP data will likely join the slew of various economic indicators released this past week that showed improvement in the U.S economy. However, the release is still unlikely to brighten the gloomy long term outlook for the economy, marred by the persistently high unemployment rate.
Economists continue to anticipate Nov. 2nd-3rd FOMC meeting will likely yield expansion of quantitative easing measures as the economic recovery, though showing signs of improvement, continues to be slower than expected. This outlook continues to weigh on the USD. While the greenback recovered this week from its record lows, particularly versus the ERU and JPY, aided by the slew of better than expected economic data released throughout the week, it is unable to maintain its gains and ultimately recedes most of them.
With tomorrow’s release the USD is expected to follow this week’s trend. If the result of the GDP is as expected or higher the greenback will likely appreciate versus its rivals, possibly moving 50-100 pips. However, traders should be cautious of a possible downward correction as investors will likely be uneasy with a strong Dollar heading to next week’s FOMC meeting minutes.
