United States GDP Revised Upwards To 3% - 29/08

(MENAFN- Daily Forex)

• US GDP revised to 3%, up from 2.8%
• Unemployment claims within expectations
• US dollar, Stock Markets Head Higher

US GDP Shows 3% Gain

United States second-estimate GDP for the second quarter, released earlier today, indicated that the Economy expanded at an annualized rate of 3.0%, according to the Bureau of Economic Analysis (BEA). This was higher than the initial estimate of 2.8% and sharply higher than the 1.4% pace of growth in the first quarter.

The second-estimate report is based on additional data that was not available for the preliminary report which was released in July. The BEA noted that the improvement in the second estimate was largely driven by an upward revision in consumer spending. At the same time, personal income was revised lower from the preliminary estimate.

Unemployment claims dipped to 231 thousand in the week ending Aug. 24, down from 233 thousand a week earlier. The market estimate was 232 thousand. The four-week moving average, which reduces week-to-week volatility, dropped to 231,500, down from 236,250 in the previous release. The unemployment claims release is not having an impact on the markets.

Top Forex Brokers1 Get Started 74% of retail CFD accounts lose money Markets Nervously Eye Next US Employment Report

Today's GDP report confirms that the US economy is in solid shape. Still, the markets remain concerned about the US labor market. In July, nonfarm payrolls slid to 114 thousand, well below expectations and down from a revised 176 thousand. Investors panicked that the US economy was hurtling towards a recession and global financial markets plunged in response to the weak employment data. The market meltdown even led to calls for the Federal Reserve to deliver an emergency unscheduled rate cut.

The US will release the August jobs report on September 6, ahead of the Federal Reserve rate decision on September 18 and the data will be a key factor in the Fed's rate decision. The Fed has carefully laid plans to deliver a 25-basis point rate cut next month but another weak employment report could reignite market jitters and raise the possibility of an outsized 50-basis point cut. The Fed has signaled that it plans to cut rates aggressively and the markets have priced in 100 basis points before the end of the year. With only three meetings remaining before year's end, that would mean a rate cut of 50 basis in one of those three meetings.
Market Reaction – US Dollar Higher, Stock Markets Show Strong Gains

Today's upward revision in the GDP report has provided a boost to the US dollar against the major currencies. The USD/JPY currency pair posted the strongest movement amongst the majors, with a gain of 0.49% immediately after the US GDP release.

In the US, the stock markets opened a short time ago and have reacted positively to the GDP report.

The S&P 500 Index is up 28 points (0.52%) at 5,622.

The Nasdaq 100 Index has jumped 184 points (0.95%) at 19,535.

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