The US Economic Growth Exceeds Expectations

FXOpen

The new trading month started with the market participants focusing on Friday’s NFP report. Because the Federal Reserve of the United States has a dual mandate, one that focuses on both price stability and job creation, the way the labor market performs is viewed as decisive for the future path of monetary policy.

While inflation has reached the Fed’s target, there is still a lot of room for improvement in the labor market. Fed’s definition of full employment leaves room for more strength before the rates could be lifted.

In the middle of last week, the Fed signaled that it is in no rush to lift the rates. Most likely, it remains intentionally behind the curve, wanting to see more strength in the labor market before acting.

But inflation and economic growth may trigger action from the Fed sooner than the market expects. We’ve seen the Gross Domestic Product released last week coming out much stronger than the expectations.

The US Economic Growth Exceeds Expectations

US GDP Grows Much Faster Than Forecasters Expected

The chart above shows a projection for the US GDP made by various institutions in the last quarter of 2020. All of them, including the FOMC, IMF, and OECD, have underestimated the growth of the US economy.

As it turned out, the actual growth path out of the economic recession is much steeper, with positive spillover effects for the main US trade partners. Because the United States is the largest economy in the world, a stronger economic recovery there is enough to add one percentage point or more to global growth.

Before the passage of the America Rescue plan, most forecasters expected that the economy would grow by 3/4%-4.2% in the four quarters of 2021. But the data released last week shows that the economy grows at an annualized rate of 6.4%, much higher than expected.

The solid growth should support the equity markets and keep the US dollar offered. Because most central banks in the developed world have adopted similar monetary policies, which are still loose, the market is dominated by risk-on/risk-off gyrations. Until we see central banks lifting rates, the chances are that the markets will remain correlated.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Stay ahead of the market!

Subscribe now to our mailing list and receive the latest market news and insights delivered directly to your inbox.

forex

Forex Trading with FXOpen

Forex Trading with FXOpen

Experience ECN technology for deep liquidity and light-speed trade execution

  • Access over 50 markets
  • Trade with spreads from 0.0 pips
  • Take advantage of commissions from $1.50/lot
Learn more

Latest articles

Bitcoin Price Eyes New All-Time High
Cryptocurrencies

Bitcoin Price Eyes New All-Time High

Yesterday, the price of Bitcoin rose by over 2%, surpassing its June high.

Several cryptocurrency platforms were quick to report that the BTC/USD pair had reached a new all-time high. Even if so, this morning’s slight pullback indicates

Analytical BTC Price Predictions: How Much May Bitcoin Be Worth in 2025–2030
Trader’s Tools

Analytical BTC Price Predictions: How Much May Bitcoin Be Worth in 2025–2030?

Bitcoin currently accounts for more than 60% of the entire crypto market. Its future is hotly debated, and in this article, we’ll take a look at Bitcoin’s price history, analytical predictions, and the factors that could drive its

Intel (INTC) Share Price Hits 3-Month High Without Clear Catalyst
Shares

Intel (INTC) Share Price Hits 3-Month High Without Clear Catalyst

Intel Corporation (INTC) stocks rose by over 7% yesterday, making them one of the top performers in the S&P 500 index (US SPX 500 mini on FXOpen). As a result, the stock price reached its highest level in

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.