US GDP Slows to 0.7%, Growth Below Forecasts
Preliminary quarterly GDP data was recorded at 0.7%, well below the 1.4% forecast and also lower than the previous figure of 1.4%. This figure signals that US economic growth is slowing more sharply than the market anticipated, adding to the narrative that some sectors of the economy are starting to lose steam.
For the market, a weaker GDP typically opens the door to expectations of looser policy as the risk of a slowdown increases. However, in the current environment, the reaction could remain limited as investors also weigh inflationary pressures especially when energy prices remain volatile as well as other, more market-moving data such as core inflation and employment.
Market Impact (in brief):
USD: likely to come under pressure if the market perceives this slowdown as increasing the likelihood of easing, but the effect could be muted if geopolitical risk-off remains high.
Treasury yields: potential to fall as the growth outlook weakens, unless energy inflation keeps the market hawkish.
Gold: could find support if yields fall and the USD weakens; However, gold remains sensitive to oil and geopolitical headlines.
What market players need to monitor next:
Growth components (consumption, investment, inventories) to identify the source of the slowdown.
Inflation data (CPI/PCE) and the direction of oil, as this will determine how hawkish the market remains.
The Fed's comments after the combined data: core inflation remains high but GDP is weakening (policy trade-off). (Cp)
Source: Newsmaker.id
