Forex Trading Guide

The US GDP

The US GDP is a gauge of the overall output of goods and services of the U.S. economy. It is the most comprehensive overall measure of economic output and provides key insight as to the driving forces of the economy.

If the figure increases, then the economy is improving, and thus the dollar tends to strengthen. If the number falls short of expectations or meets the consensus, dollar bearishness may be triggered.

However, on Friday the 24th. When the GDP for the second quarter was announced, most Retail Traders who traded Dollar related currency with the announcement did not make money. The GDP for the second quarter was much better than anticipated and also than that of the first quarter. There was an improvement in growth of about 5 percent but the Dollar reacted in the opposite direction. The market reacted negatively resulting in the decline of the Dollar.

The Dollar declined against the Pound and the Euro after the report showed the U.S. economy shrank less than what economists had earlier forecasted. Economists had earlier forecasted a GDP of – 1.5 percent.

Reliability of the US GDP

The forecast for US GDP was - 1.5 percent in the second quarter, following a - 6.4 percent drop in the first quarter of 2009. The Dollar rightfully should have strengthened with the improvement in the GDP.

With the forecast as the guide, most Retail Traders went short on Dollar related currencies.

Initially, the Dollar pared some losses after the U.S. GDP report also showed consumer spending shrank by another 1.2 percent compared to the spending in May.

But the Dollar declines thereafter apparently because the GDP at -1.0 percent is a show that U.S. economy shrank less than what economists had earlier forecasted.

Technorati : Dollar, Euro, Forex, GDP, News, Pound, US