Daily Brief, July 26 – Economic Events Outlook, Trading US Advance GDP
Arslan Butt • 2 min read
Happy Friday, traders.
On Friday, the dollar trades bullish, reaching around two-weeks high against Japanese Yen as traders pared sentiments for an aggressive Federal Reserve interest rate cuts ahead of key US economic data releasing later in the day.
The market focus stays on the Greenback and direct currency pairs as the US economy is due to release advance GDP during the New York session. Gross domestic product is one of the high impact economic events and typically drives massive fluctuations not only in the forex but also in commodity and stock markets. Therefore, we are going to discuss the expectations and the potential impact of US GDP on the market.
Watchlist – Key Economic Events Today
Advance GDP q/q – 12:30 GMT
The gross domestic product is the broadest measure of economic activity and the primary gauge of the economy’s health. It shows an annualized change in the inflation-adjusted value of all goods and services produced by the economy.
The Bureau of Economic Analysis is due to release the US GDP data at 12:30 GMT. The advanced GDP is expected to plunge from 3.1% to 1.8%, which is dramatically lower than in previous years. The GDP has never performed that poor since April 2017.
So, if the actual figure falling to 1.8% gives the Federal Reserve a solid reason to consider rate cuts this year. It’s going to be a busy week, so brace yourself to trade the volatility and price action.
Impact on different Trading Instruments
US Dollar – USD
The advance GDP figures of more than 1.8% can drive bearish movement in the dollar. However, the greenback can face a sharp dip upon the release of a less than forecast 1.8% GDP. It’s already getting hard for investors to absorb 1.8% figure on cards.
Gold – XAU/USD
Likewise, a negative GDP can drive bullish waves in gold due to the negative correlation between gold and dollar.
As you know, a better than expected GDP is considered suitable for the economy. However, at the same time, it hikes the chances of interest rate hikes. Therefore, on the release of optimistic GDP, we can expect a bullish momentum in the US stock market for the first hours only. The odds of bearish reversal will stay as stock market investors don’t like higher interest rates.
Advance GDP Price Index q/q – 12:30 GMT
It’s the broadest measure of inflation, encompassing all activities included in GDP, and is a primary instrument that the central bank uses to assess inflation. Economists are expecting a sharp surge in the figure, up from 0.9% to 4.0% in June. The figure can extend support to US dollar today.
Follow us for the live coverage of advance GDP figures here.
That’s it for now; in the next update we will be discussing how to trade Gold on Advance GDP data. So, stay tuned to FX Leaders. Good luck!