Economic Activity in the U.S. Slows to 2.4 Percent in the Second Quarter

Meanwhile, the Federal Reserve’s preferred measure of inflation measure; the core PCE deflator added 1.1 percent in the second quarter, which is slightly lower than figures the quarter prior which gained 1.2 percent. Indeed, inventories continue to account for massive share of growth, and in fact, inventories may remain low over the medium term as companies continue to maintain an uncertain outlook. Today’s figures do not come to much of a surprise as Federal Chairman Ben Bernanke recently signaled that no moves were imminent to bolster the economic recovery despite a “somewhat weaker outlook,” while Senator Dodd added that “it looks like our economy is in need of additional help.”

Looking ahead, market participants will now shift their focus to the Chicago purchasing managers’ index for the month of July, while the final reading from the University of Michigan consumer sentiment is expected to rise to 67.0 from 66.5 the reading prior.


Market Reaction 

Immediately following the disappointing data the USD/JPY fell from a high 86.44 to a low of 85.95. Indeed, the intraday low marks the lowest level since November 30th 2009. Going forward, we may continue to see the U.S. dollar lose ground against the Japanese Yen as our speculative sentiment index now stands at an extreme level of 5.507, signaling for further declines.


Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast