The US dollar rose today following the release of the Q2 GDP data that pointed toward a pickup in growth for the world’s largest economy.
By Kevin Loane
Wednesday, July 30, 2014
Market sentiment was initially buoyed going into today’s session by strong financial results from Twitter ($TWTR) last night. Earlier the social networking giant, who had fallen out of favor with some investors, announced big gains in active users and revenue. This news helped to send the stock price up by almost 30% in after-hours trading.
Market watchers had a lot to digest in what was a busy day for economic events. ADP($ADP) was first up, and announced that private sector employment increased by 218,000 (Consensus: 230,000) in July. The downside miss came as a surprise after last week’s impressive jobless claims figures, and led to a small selloff in stocks. There will now be a lot of focus for concern that the more closely watched Bureau of Labor Statistics (BLS) measure of nonfarm employment will disappoint when it is published on Friday (Consensus: 233,000).
Fifteen minutes later, the Bureau of Economic Analysis’ (BEA) advance estimate of GDP pointed to 4.0% (AR) growth in Q2. The number was above the 3.0% figure that market participants expected, and came with an upward revision to the Q1 data. Durable goods posted a notable 14.0% (AR) rise, signalling corporate confidence in the outlook for growth. The release was positive across a range of sectors, and helped support the consensus view that Q1’s GDP decline was a weather-induced blip.
Traders welcomed the figures, but appeared nervous ahead of this evening’s Federal Open Market Committee (FOMC) policy decision. By 1:00 PM in New York the S&P 500 fell 0.1 percent to 1,967.26, after rising as much as 0.5 percent earlier. The Dow Jones Industrial Average has lost 53.62 points, or 0.3 percent, to 16,858.49. The Nasdaq 100 Index has increased 0.3 percent.
Forex markets reacted to the impressive GDP print, pushing the dollar up against a range of currencies. EUR/USD declined, and was down by 0.3% to 1.3374 by 10:30 EDT. Elsewhere, GBP/USD fell by a similar percentage to 1.6896 while USD/JPY rose by more than 0.5% to 102.69. Traders will be eyeing the euro ahead of tomorrow’s inflation announcement. German CPI data suggested an uptick in price pressure this July. Should that trend be replicated across the currency bloc, markets may discount the potential for any imminent European Central Bank (ECB) loosening, perhaps putting upward pressure on the common currency.
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