New York Stock Exchange building at Wall Street, Manhattan, NYC. Image source: Tatiana Morozova © 123RF.com
The Bureau of Economic Analysis just released its preliminary findings regarding the growth rate of the US Gross Domestic Product for the first quarter of 2020. The results did not meet the initial forecasts.
The market was expecting the growth rate to be recorded at -4.8 per cent, but instead, the contraction of the American economy was more substantial, reaching -5.0 per cent in the three months to March.
US GDP Growth Rate. Image source: TradingEconomics.com
This downwards revision of 0.2 per cent underscores the more significant impact of the economic fallout triggered by the coronavirus crisis than previously anticipated by the market.
It also seems to justify Jerome Powell's remarks from the middle of May, when the Chair of the FED cautioned against the still prevalent uncertainty of the pandemic that continues to cast a shadow over the expectations for a quick economic recovery.
Today's data might prompt the Federal Reserve to reconsider its stance. Previously the Bank had expressed readiness to increase the scope of its already accommodative monetary policy if it deems it necessary.
In the wake of the coronavirus crisis, the FED listed the need to keep the primary financial markets liquid during the lockdown and the subsequent recovery process as a top priority.
Given the deeper-than-expected economic contraction that was observed today, as well as the deteriorating retail sector and falling inflation, these developments might underline the need for a more comprehensive asset-purchasing program.
In the meantime, all of these external pressures continue to weigh down heavily on the US dollar, which loses ground to other major currencies, as it was shown in today's analysis.
The greenback continues to struggle against the Loonie as well. The USDCAD looks ready to begin establishing a new major bearish trend after it broke down below the major support level at 1.38600.
USDCAD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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