This week forex traders will have three different GDP reports, or Gross Domestic Product reports, which give an important look at economic developments. This can be viewed as a snapshot for the global economy and the first-quarter of 2015 is off to a much slower start than expected. Looking at what has been released forex traders may be surprised by which country performed the worst, but it does explain the movements in the currency market.
What is a GDP report? A GDP report measures the economic performance and covers all important pillars of the economy. It gives an insight if the economy as a whole expanded or contracted and is the widest measure of economic health. Forex traders should always be aware of GDP reports as the release will not only impact the forex market, but also give an insight about potential future performance. A GDP report can dictate central bank action and ring in longer-term price changes.
The first GDP report which was released this week came out of the UK and was the best one out of the three which were being released this week. Many forex traders have a very bearish outlook on Europe, especially the Eurozone, but the UK has managed to print solid figures. Despite the decent report, it showed a much slower economy than expected. First-quarter GDP rose by only 0.3% which is half the 0.6% growth rate reported in the fourth-quarter and below the 0.5% increase expected. The Annualized GDP rose by 2.4%, below the 2.6% growth rate expected and slower than the 3.0% increase reported in the fourth-quarter.
The second GDP report comes out of the US and is the worst one released this week. Too many were hoping for a stronger number and many were shocked when the US economy contracted in the first-quarter as the GDP came in at -0.1%. The majority of key elements such as business spending contributed to the contraction. Economists expected an increase of 0.5% which can be compared to the fourth-quarter increase of 0.1%. The US economy missed a recession by the smallest margin possible. The annualized GDP showed an increase of only 0.2%, missing estimates for a growth rate of 1.0% and drastically below the 2.2% GDP growth rate reported in the fourth-quarter.
The third and final GDP report is the one released out of Canada earlier today. Economists expected a contraction of 0.1% in February and an annualized increase of 1.9%. The GDP report came in better than expected with a flat reading in February and an annualized increase of 2.1%. Forex traders can compare this to January’s contraction of 0.1% and annualized increase of 2.4%. Given the heavy dependence on the energy sector and the slowdown witnessed the Canadian economy performed considerably well.