Summary:

• US Advance GDP Q/Q 3.0% vs 2.6% expected
• Two-quarter performance the strongest in three years
• USD rising after the release. USDJPY tests key level at 114.50

The world’s largest economy continues to grow at an impressive pace with the US advance GDP Q/Q for the 3rd quarter coming in at 3.0%. This is markedly higher than the 2.6% expected and with the prior reading being revised higher to 3.1% the release is a clear positive for the greenback.

 The US GDP reading came in at 3.0%, above consensus forecasts of a 2.6% rise. Source: Bloomberg

The growth came on the back of some strong consumer spending with motor vehicle sales rising strongly. Personal consumption came in at 2.4% vs 2.1% expected. The rise is all the more impressive when you consider the potential negative impact of hurricanes Harvey and Irma on the economy. If you are looking for faults one potential blot on the release was the slowdown seen in services spending which fell to its weakest since 2013, but there is little doubt that overall this a strong data point. 

One further aspect of the release which has caught the eye of traders is the GDP price index which came in a 2.2% against expectations for a 1.7% gain. The rise in prices is likely positive for the US dollar with a higher reading in this metric often seen as ultimately feeding through to higher inflation. 

USDJPY hit a 3-month high shortly after the release. 114.50 could be a key level to watch going forward. Source: xStation

The market has reacted as you would expect to strong US data with the USD popping higher whilst the TNOTE and Gold both fell lower. The USDJPY is one pair that is now at an interesting level with the price rising to a potentially key prior swing level at 114.50. This is the highest the market has traded in more than 3 months and how price reacts around here could be key going forward. A clean break above could lead to a prolonged rally and an extension of the rise seen of late with the next swing level to look for coming in at 115.45. Alternatively a failure here could see price drop with 113.25 a possible support zone.