US GDP Preview: The good enough growth will likely be confirmed

The final version of US Q1 GDP is likely to confirm the first read.
A drop below 2% or a rise above 2.5% would be needed to rock the boat.
The publication is set to provide a temporary relief from the trade wars.

Yohay Elam FXStreet

The United States will publish its third and final version of growth for the first quarter of 2018 on Thursday, June 28th, at 12:30 GMT. The last read is projected to confirm the second read, which showed a growth rate of 2.2% annualized.

A growth rate of 2.2% is slower than Q2, Q3, and Q4 2017, but quite upbeat for a first quarter of the year in the US. 2017 was not the only year to start on the back foot and see a pick up later. In addition, the euro-zone and the UK suffered more significant slowdowns in early 2018 and they are still trying to find their feet.

All in all, even if the slow level of growth is confirmed, it still puts the US ahead of its peers. Moreover, while countries across the pond are still recovering, data for Q2 in the US looks much promising, with some talking about a growth rate of around 4% annualized.

What results could move the US Dollar

A confirmation of 2.2% growth would likely trigger an examination of the components, first and foremost, Personal Consumption. The US economy is all around consumption. Any upgrade in this component would support the US Dollar while a downgrade would weigh on it.

Among the other positive components, an upgrade in exports would help, and so would an increase in investment. On the other hand, growth in government spending and inventories is not the kind of growth markets want. A rapid rise in inventories during one quarter usually results in a depletion of these inventories in the following one.

A change in the headline would trigger a more significant result, but the deviation will likely need to be stronger. A fall under the round number of 2% would be a source of concern even if Q2 looks promising. Such a downgrade could weigh on the greenback.

On the other hand, an upgrade to 2.5% or higher would already be very bullish for the economy and the US Dollar as well.

Trade wars

The main theme haunting markets are the tariffs and counter-tariffs that the US exchanges with its North American peers, the European Union, and China, which is currently in the limelight. Even though GDP is an overview of the economy and a top-tier figure, the emotional swings of fear and relief amid news of trade actions will likely take back control once the dust from the publication settles.

More: Trade wars: Only a stock market crash can stop Trump, 3 reasons

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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