FXstreet.com (Barcelona) - US economy shrunk at a 3.8% seasonally adjusted pace from October to December 2008; its fastest pace in more than 26 years on the back of sharp declines in business and consumer spending, according to preliminary data released by the U.S Commerce Department.
The U.S. dollar rose on the back of the GDP against most Majors, according to Kathy Lien, Director of Currency Research at GFT: The smaller drop in GDP drove the US dollar higher against every major currency except for the Japanese Yen. However the dollar rally may not last because GDP is a backward looking numbe. We could still see a larger contraction in growth during the first quarter, especially with the amount of layoffs that have been reported thus far. The key is to keep an eye on the market's risk appetite.
Nick nasad, Analyst at CMS Forex has pointed out to the better than expected GDP as the main reason of Dollar's rally: it seems that dollar strength from a better than expected release is beating out an increase to risk appetite (which might be dollar negative). Though we aren't seeing a clear break in either direction. surprising considering the better result.