US GDP misses with 2.6%, but inventories are to blame – USD suffers a limited drop

The US economy grew at an annualized pace of 2.6%, significantly lower than 3% expected. Among the details, personal consumption is up 3.8% instead of 3.7% expected. The prices index is up 2.4% instead of 2.3% that was on the cards. Inventory numbers fell, and that pulled GDP lower.

Durable goods orders came out at 2.9% m/m, above 0.9% predicted. Core orders advanced by 0.6%, more than 0.5% forecast. Excluding defense, there is a drop of 0.3% instead of 0.6% that was projected, so it’s a bit of a mixed bag.

The US dollar is initially lower across the board.

  • EUR/USD traded around 1.2433. It got a boost from Draghi’s unsuccessful jawboning. It is now up to 1.2450.
  • GBP/USD was around 1.4240. The UK GDP came out above expectations. We are now a touch higher at 1.4250.
  • USD/JPY was around 109.30 and there is limited change there.
  • USD/CAD was trading around 1.2320. Canada released its CPI at the same time, as NAFTA talks are going on in the background. Headline CPI missed with 0.4% while core figures were OK.
  • AUD/USD traded around 0.8090. Resistance is at 0.8130.

The US was expected to report an annualized growth rate of 3% in the fourth quarter after 3.2% in the final read for Q3. This is the first read out of three.

Durable goods orders for December were predicted to rise by 0.8% after 1.3% in November (before revisions). Core orders carried expectations for an advance of 0.5% after a slide of 0.1% beforehand.

The US dollar remained on the back foot ahead of the GDP release. We had US Treasury Secretary Steven Mnuchin send the dollar plunging on his “a weak dollar is good for the US” comment. And yesterday we had his boss, President Trump, pumping up the dollar. But as the dust settled, the greenback retreated once again. Things have stabilized ahead of the release.

Trump talked in Davos earlier but did not make any market-moving news. He said that “America first does not mean America alone”.

More: Bitcoin could fall to the $6800-8700 region – Elliott Wave Analysis


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