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The smaller than expected downward revision to fourth quarter GDP growth led to a short lived rally in the U.S. dollar. Despite the doom and gloom outlook by some economists and the pessimistic feel on Main Street, recent economic data has not been as weak as everyone expected. Contrary to the overly pessimistic call by economists, GDP growth was revised from -6.2 percent to -6.3 percent in the fourth quarter, far less than the -6.6 percent forecast. GDP growth was still the weakest in 26 years as profits plunged 16.5 percent, the largest decline in 55 years.
Currency traders shrugged off the underlying weakness because the GDP report is backward looking. The smaller revision provides relief but investors are still cautious about believing in a recovery. The unemployment rolls continued to grow with continuing claims hitting 5.56 million, another record high. Weekly jobless claims have increased once again from 644k to 652k last week. Despite the recent improvements in economic data, there is no question that the problems in the labor market are increasing and growing unemployment will stifle any chance of recovery.
Source Kathy Lien. Fx360.com
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