US final GDP revision unlikely to impact the markets

The final or the third revision to the fourth quarter GDP for 2016 will be released today by the US Department of commerce. But despite the slightly hawkish expectations/forecasts given for the data today, it is unlikely that the final revised GDP will impact the markets much. At best, expect a knee-jerk reaction while the existing trends are likely to continue in the near term.

Economists polled are expecting to see the US GDP expand 2.0% as of the third revision, slightly higher from 1.9% that was registered during the second revision released on February 28, which saw an unchanged print at 1.9% from the initial estimates.

Overall, the GDP figures for the fourth quarter reveal a weaker pace of growth, following a 3.5% GDP expansion registered during the third quarter. At 1.9% year over year GDP growth, the data was in line with the average 2% expansion which has been in place since the crisis of 2008.

US consumers continue to remain at the forefront, driving the economy. At the second revision, US consumer spending rose ending was boosted by a tighter job market which is continuing to absorb the remaining slack, while lower borrowing costs and rising confidence have helped to bring optimism to the consumers.

U.S. current account deficit narrows in Q4

Following the February 28 second revised GDP fresh economic data for the period of Q4 2016 was the current account deficit. Official data showed that the deficit decreased to $112.4 billion in the fourth quarter as of the preliminary reading. This was lower than the third quarter’s revised headline print of $116.0 billion.

In relative terms, the current account deficit decreased to 2.4% of the current GDP from 2.5% in the previous quarter. Contributing to the deficit was a surplus of primary income which was offset by an increase in the deficit of goods, adding to the $3.6 billion decrease.

EURUSD to remain bearish in the near term

The US dollar which started the week on somber note managed to regain some of the lost ground. Last week, after the Healthcare repeal bill failed to pass, investors who already grew wary of Trump’s delayed announcement on tax and infrastructure reforms started to tone down their bullish bets on the U.S. dollar.

The greenback, however, managed to reverse the losses, riding on the back of solid readings in the Richmond Fed manufacturing index and the CB consumer confidence reports, both of which saw the headline prints at record highs.

Furthermore, various Fed members also continued to cheer the economy maintaining a rather uniform voice of building expectations for two more rate hikes from the Federal Reserve. This helped to boost investor’s confidence back into the U.S. dollar.

The greenback also got unlikely support from a weaker euro, which fell after reports showed that ECB officials were worried about sending wrong messages to the markets in regards to raising expectations of the ECB ending its QE program and hiking rates eventually.

Regardless of the possibility of no change to the final revised GDP today, EURUSD is expected to maintain the declines in the near term after breaching past $1.0800 level yesterday. In the near term, any rallies in EURUSD are likely to attract new sellers into the market, especially around the $1.0800 handle, targeting the next support at $1.0700 and $1.0600.

In the longer run, EURUSD is unlikely to show any strong hints of trends as the larger sideways range is expected to continue for the considerable future. However in the near term, within the range, EURUSD could be seen pulling back towards $1.0600.