U.S. GDP, Trump And The Market
Dave Green • 2 min read
The much anticipated U.S. GDP number for the second quarter(Q2) came in this morning at 8:30 AM EST. No real surprises in the report, but GDP did realize the estimated positive growth.
This is undoubtedly welcomed news by the Trump administration. Last fall, Trump’s campaign rhetoric proposed 4% GDP growth as the benchmark for success. Treasury Secretary Mnuchin tempered these expectations back in the early spring quoting 3% growth as a win.
Here are a few highlights from the official report for Q2:
Item Previous Projected Actual
GDP Annualized 1.2% 2.6% 2.6%
GDP Price Index 2.0% 1.3% 1.0%
Core Personal Consumption (QoQ) 1.8% 0.8% 0.9%
Personal Consumption Prices(QoQ) 2.2% 1.2% 0.3%
At 10:00 AM EST the Michigan Consumer Index for July came in above expectations at 93.4.
It is worth noting that FOMC member Neel Kashkari will be speaking at 1:20 PM EST. His speech isn’t likely to bring volatility, but comments may shed some light on the FED’s plans for September.
With no earth shattering news to report, the markets took the GDP stats in stride. A short term rally in August gold futures came immediately after the release. September E-Mini S&P futures didn’t do much but showed some strength on the cash open at 9:30 AM EST.
Currencies saw some volatility. Here is how the majors took the news in the minute immediately after GDP:
EUR/USD rallied 7 pips
AUD/USD rallied 8 pips
GBP/USD rallied 4 pips
USD/CAD lost 24 pips
USD/CHF lost 9 pips
USD/JPY lost 13 pips
It is always instructive to take a look at the moves following a big economic number. It can be tough to trade during these periods. But, when other technicals line up properly, there are opportunities to be had.
Q2 GDP didn’t surprise anyone. In fact, Twitter stood ready for President Trump to laud the positive number as a step in the right direction. Instead, U.S. healthcare reform had his attention.
Bottom line: GDP was good, not great. Certainly a step in the right direction, but one foreseen by the markets.