Arguably the most important economic event scheduled for the weak ahead, the Preliminary GDP data in the US is expected to validate the state of affairs in the US economy and also to illustrate the impact that the ongoing trade war between the US and China is exerting on the growth prospects of the world’s biggest economy.
The GDP data is going to be presented in an economic report that is being advanced by the Bureau of Economic Analysis and is scheduled for release on Thursday. The general market forecasts project a slower-growth rate at 2 per cent to be reflected by Thursday’s report, which is going to be the weakest recorded performance of the US economy in over three years. This excludes the isolated collapse that was registered in January of 2019 owing mostly to the US Government Shutdown in late 2018.
The preliminary GDP growth data is particularly important in the financial markets because it exhibits early indications regarding the most likely direction for the US economy in the coming quarter. Owing to that antecedent nature of the report, most traders and investors prefer to take advantage of the GDP data by placing multiple trading orders around the time of the report’s release, which tends to trigger heightened volatility in some US markets at that time.
The US dollar currency index has broken below the fundamentally important resistance level of 98.16 for the second consecutive time this month, following China's announcement to implement additional tariffs on American products and Donal Trump's swift retaliation on social media stating that he too would raise the tariffs on Chinese goods.
Thus, the expected volatility stemming from the release of the GDP preliminary report on Thursday in addition to the already heightened price fluctuations of the index owing to the continuation of the trade war can cause the price to become exceptionally volatile on Thursday.