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The vast majority of retail client accounts lose money when trading CFDs.

You should consider whether you can afford to take the high risk of losing your money.

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54.76% of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 54.76% of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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Weak GDP Could Sway the US Economy Into a Recession

Tonight, crucial economic data about the US first-quarter real GDP growth final annualised rate will be released. The previous value was -1.50%, and the expected value was -1.40%. Many experts predict that the US economy may fall into recession as the country faces multiple macro challenges that cannot be quickly resolved. Hence, investors are particularly concerned about the final GDP data during the first quarter.

At the same time, the forecasts for the second-quarter GDP growth of the United States are not optimistic. The Atlanta United Bank forecast shows that the domestic GDP growth in the second quarter may be zero, indicating that the economy is on the verge of a recession. If the US GDP growth is negative for two consecutive quarters, it will suggest that the country’s economy is in recession.

us gdp recession

Goldman Sachs kept its US GDP growth forecast unchanged at 2.8 percent in the second quarter but lowered its growth forecast from the third quarter of 2022 to the first quarter of 2023. There is a belief that the US economy is more likely to fall into recession in the next two years, with the cumulative probability of such an outcome rising to 48%.

The latest data from Atlanta United Bank's GDPNow forecast model was available on June 7. The annual growth rate of the United States gross domestic product (GDP) in Q2 was revised from 1.3% to 0.9%. The forecasts indicate that the US economy is relatively close to recession after a 1.5% decline in the first quarter.

The upcoming GDP data will be crucial for the US dollar’s trend. Despite speculation of a 0.75% interest rate hike next month, the market seems to believe a 0.50% rate hike is more likely, after which interest rates will peak at around 3.5% in March 2023. Suppose the US Federal Reserve gradually reduces or terminates future rate hikes as the market predicts. In that case, such a move would be detrimental to the US dollar's subsequent performance.

Suppose data shows the US economy is likely to enter a recession and register zero or negative growth. In such a scenario, aggressive rate hikes will be even lower because the Fed will not choose to sacrifice economic growth to raise interest rates significantly. As a result, the magnitude of future rate hikes may be limited. Therefore, the recent downturn in financial data will also be a negative factor for the US dollar trend. Conversely, if US economic data exceeds market expectations, the Fed is likely to decide to raise interest rates more firmly, which could help the dollar rebound.

On the other hand, the trend in oil prices in the United States is still high. Although gasoline prices have fallen in the past two weeks, this has not changed the situation of escalating crude oil prices. The Biden administration wants to cool oil prices by banning exports and suspending gasoline taxes. However, the current global situation of tight energy supply is pushing oil prices higher, coupled with sanctions against Russia, which continue to support higher oil prices. Reducing inflation over the short term is challenging since cooling oil prices is hard when there is an imbalance between supply and demand. This will help maintain the expectation of interest rate hikes. Still, the amplitude will also be constrained by economic data.

gdp recession

Uncertainty regarding the dollar highlights the importance of monitoring if an interest rate hike could be adjusted due to changes in economic data. The high significance of the GDP data for the first and second quarters and the data from various segments to assess whether the US economy will fall into recession cannot be overstressed. However, the current economic downturn forecast is not conducive to boosting the stock market, which continues to be sluggish. Comments by crucial Fed officials reflect their position on interest rate hikes, with many being hawkish. Changes in market sentiment and whether they can bring some rebound momentum to the stock market can be identified from observing such patterns.

Last Updated: 29/06/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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