Economics play a huge role in the foreign exchange market. I enjoy looking at economic trends and trying to see how it affect currencies and life in general. I will post my thoughts and observations here. I'm throwing macroeconomics, forex trading, pop culture, and everyday life into a pot and hopefully the final product are lessons that are easy for you to consume.
Getting ready for good ol' GDP
Gross Domestic Product (GDP)
Tomorrow we have the GDP report coming out at 8:30 am ET. GDP is the broadest measure of growth for the US economy so I thought it would be worth spotlighting. If you aren't familiar with GDP then take a quick minute to go to our Forexpedia to read all about it.
Here's a snapshot of what the month to month GDP has been since 2005:
You can see that GDP has been slumping since the beginning of this year and was revised down to 2.0% for the 3rd quarter of 2006 compared to the initial 2.6% that was first reported. Translation? The US economy has been slowing down throughout 2006 as evident by the several rate pauses by the Fed.
There is a problem though. Month to month GDP can be volatile and as a result be tricky to get an accurate picture of the overall GDP trend. To help with this problem, many economists look at the year-over-year growth in GDP.
Year over year GDP growth has been like a see-saw but last quarter it actually dipped below 3%. Could tomorrow's report push it even lower? If it does, then the dollar could be in trouble!
GDP has been moderate with slight inclinations of a decline so tomorrow's report could be a very big market mover if the number is surprisingly high or low.
