US Q1 GDP Advance Reading: Implications for Fed Policy and USD/JPY
On Thursday, the advance reading for US Q1 GDP growth will be released at 1230 GMT (0830 US Eastern time). The Federal Reserve will be closely monitoring this data to assess the strength of the US economy. Stronger-than-expected growth may bolster the case for delaying rate cuts, while weaker-than-expected growth could suggest the need for earlier easing.
This data also has implications for the Bank of Japan and Japan’s Ministry of Finance. If growth surprises to the upside, it could spur buying in the USD/JPY pair and delay potential intervention to support the yen.
Consensus expectations for Q1 GDP growth are summarized in the table below. The range of expectations spans from 1.0% to 3.1% year-over-year, with a consensus estimate of 2.5%. Goldman Sachs forecasts growth at the higher end of this range, predicting 3.1%.
Importance of Market Expectations
Understanding the range of market expectations is crucial because data results that fall outside of these expectations tend to have a more significant impact on markets. This is due to several reasons:
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Confirmation or Contradiction of Existing Views:
Data that aligns with expectations confirms prevailing market views, while data that deviates from expectations challenges those views and forces market participants to reassess their positions.*
Triggering of Stop-Loss and Take-Profit Orders:
Many traders place stop-loss and take-profit orders around key levels, such as market expectations. Data that breaches these levels can trigger a cascade of orders, amplifying market movements.*
