US GDP KEY POINTS:
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The US Economy expanded at an annualized rate of 5.2% in Q3 2023, upwardly revised from the first estimate of 4.9% and above the forecasted figure of 5%. The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.
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The update primarily reflected upward revisions to nonresidential fixed investment and state and local government spending that were partly offset by a downward revision to consumer spending.
Also, residential investment rose for the first time in nearly two years and at a much faster pace than initially expected (6.2% vs 3.9% in the advance estimate). Meanwhile, private inventories added 1.4 pp to growth, above 1.32 pp in the previous estimate and government spending increased faster (5.5% vs 4.6%). On the other hand, consumer spending went up 3.6%, slightly less than 4% in the advance estimate, but remaining the biggest gain since Q4 2021
Source: US Bureau of Economic Analysis
Disposable personal incomeincreased $144.0 billion, or 2.9 percent, in the third quarter, an upward revision of $48.2 billion from the previous estimate.Real disposable personal incomeincreased 0.1 percent, an upward revision of 1.1 percentage points.
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US ECONOMY
The data today seems to have had little impact on the US Dollar as it actually lost some ground in the aftermath of the release. There is growing optimism for more aggressive rate cuts in 2024 with industry titans like Bill Ackman saying that he believes the Fed may begin cutting rate earlier than markets participate. Fed Policymakers for their part have struck an uncharacteristically dovish tone in comments this week with policymaker Bowman one of the few maintaining a slightly hawkish stance.
The US Economy is not expected to keep up the pace of economic growth in Q4 with Fed policymaker eyeing growth of between 1-2%. Appears to be waning in Q4 as higher borrowing costs curb hiring and spending. One of the areas that remain a concern for the Fed is the Service sector and which has experienced high demand which has kept prices elevated. It will be intriguing to see how the US economy navigates the end of 2023 and starts 2024 and whether the fight against inflation is well and truly behind the Federal Reserve.
MARKET REACTION
Following the data release the dollar index remained relatively unchanged which shouldn’t come as a surprise. Since then, the DXY has actually retreated a bit but still remain marginally up for the day as it looks to bounce back from 4-month lows.
Dollar Index (DXY) Daily Chart- November 29, 2023
Source: TradingView, prepared by Zain Vawda
Gold prices surprised me yesterday if I am being honest but the explosion above the $2000 mark came about largely as markets priced in more rate cuts from the Fed in 2024. At current price levels there is not a lot to analyze from a technical standpoint as price has barely traded at these levels in the past.
However, should we fail to break above the $2050 mark and given the speed of the rally yesterday we could get some form of retracement. Gold bulls will hope for a weekly candle close above the $2000 mark which would be a meaningful step toward further upside.
XAUUSD Daily Chart- November 29, 2023
Source: TradingView, prepared by Zain Vawda
| Change in | Longs | Shorts | OI |
| Daily | -2% | -6% | -4% |
| Weekly | -15% | 19% | 0% |
— Written by Zain Vawda for DailyFX.com
Contact and follow Zain on Twitter: @zvawda