Trade Desk Thoughts - Preliminary GDP

Preliminary GDP (Q2) Actual 3.3%, Expected 2.6%, Previous 1.9%

Release Explanation: Gross Domestic Product (GDP) measures the monetary value of all goods and services produced within a Country's borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy's overall health. It includes all Company and Personal consumption, government outlays, investments, and exports less imports, that occur within a defined territory. A strong annual GDP outlook will lead to strong investment in an economy especially from overseas. A weak annual GDP outlook will usually lead to a slow down in the economic business cycle. The yearly forecast is as important as the actual release number. As a reflection of the value of what an economy is producing, GDP will invariably have a ripple effect across all other economic releases, over a period of time. A volatile release because just one airplane order not accounted for can move the number by 0.5% and therefore lead to volatile re-alignments of Currency positions.

Trade Desk Thoughts: The biggest contributor to growth was the trade deficit, which was the smallest in eight years. The annual trade gap decreased to $376 billion and added 3.1 percentage points to GDP. Without the contribution from exports, the economy would have expended by 0.2%.

"Exports and a decrease in the trade deficit, along with a smaller decline in business inventories, were big contributors to the preliminary second quarter GDP," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "The second quarter is likely to represent a peak for the year, and as we saw yesterday with the Durable Goods report, Q3 GDP looks to come in at around 1.5%. However, with stagnation or outright contraction occurring in the U.K., Japan and the Euro area, along with the dollar's recent appreciation, the contribution from exports is likely to wane going forward."

Forex Technical Reaction: S&P futures jumped after the GDP was released even though unemployment claims remained high. Currency valuations remained steady as traders wiegh the risk of higher oil prices against the better-than-expected GDP number.

Written by TheLFB Trade Team, © 2007-2008 LFB Services, LLC. All rights reserved. http://www.TheLFB-Forex.com

TheLFB Risk Disclaimer can be found at http://www.thelfb-forex.com/content.aspx?id=174.

The Copying, Broadcast, Republication or Redistribution of TheLFB Content is Expressly Prohibited Without the Prior Written Consent of LFB Services, LLC.