Real interest rate declines after preliminary Q4 GDP revised down
Source: www.tradingview.com
Yesterday's GDP data show that the US economy decelerated at a higher pace than previously reported. Q4 GDP was revised to 2.7%, which is down from the previously reported number of 2.9% and lower than Q3's 3.2%. The revision is due to lower consumer spending and exports, with personal consumption expenditure up 1.4% compared with the prior forecast of 2.1%.
This is a case where bad news may be good news. The slowdown bolsters the case for a moderation in interest rates hikes. US 10-year real rates have been steaming ahead in February after the blowout NFP and CPI releases. Its trend's momentum is defined by the upward sloping trend line. Yesterday's action shows a breakdown (green vertical rectangle) through the trend line and a deceleration in the real rate trend.
There is still some volatility to come. Core PCE, the Fed's preferred measure of inflation, will be released today at 1:30pm GMT.
Image by Mediamodifier from Pixabay
Russell Shor
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.
Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.