Generally weak US data: the economy grew by 1.9%, below expectations. Adding fuel to the fire, a replenishing of inventories contributed 1% to GDP. A buildup in inventories during one quarter tends to result in a depletion in the following one. Durable goods orders are down 0.4%. Core orders are at 0.5% as expected and even with an upwards revision.
The US dollar is down, but certainly not out.
The US was expected to report that the economy grew at an annualized pace of 2.2% in Q4 2016, in its first release. The initial estimate has the biggest impact. In Q3, the economy finally bounced back after three consecutive quarters of subdued growth and advanced by 3.5% according to the final read.
The initial reaction is to the headline number, but also the composition of growth matters: consumer spending and investment are “good growth” while inventory buildup and government spending are “bad growth”.
The US dollar was generally stronger ahead of the publication. EUR/USD traded around 1.0675, GBP/USD at 1.2535, USD/JPY around 115.20, USD/CAD at 1.3115, AUD/USD at 0.7535 and NZD/USD 0.7250,
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The GDP release consists of additional measures: Core PCE was expected to rise 1.4%, the PCE by 2.1% and the deflator by 2.1% after 1.4% beforehand.
At the same time, durable goods orders for December were published. A rise of 2.6% in the headline figure was predicted to follow a drop of 4.5% in November. Core orders carried expectations of +0.5% after 0.6%.
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