Robust GDP Number Sends U.S. Dollar Soaring

The U.S. Dollar strengthened for a sixth day after a report confirmed U.S. economic growth accelerated faster than previously estimated, increasing the chances of an interest rate hike by the Federal Reserve.

The Greenback rose after it was reported that the U.S. gross domestic product grew at a revised 4.6 percent annualized rate in the second quarter. This was the fastest rate of growth since Q3 of 2011. Today’s number beat the previous estimate of 4.2 percent and was up substantially from the first quarter’s 2.1 percent contraction.

In another report, Revised University of Michigan Consumer Sentiment came out unchanged at 84.6. This was below the estimate of 85.1.

Traders primarily ignored the consumer sentiment number, clearly choosing to focus on the GDP report. As the dollar rose to nearly its highest level since July 2013, the British Pound, Euro and gold markets all fell from the pressure of a higher Greenback.

The GBP/USD is set to finish the week lower mainly due to pressure from the strengthening U.S. economy. Last week’s euphoria created by the outcome of the Scottish independence vote has clearly worn off. Traders are now focusing on the timing of interest rate hikes by the U.S. Federal Reserve and the Bank of England. Based on this week’s response by traders, it looks as if they are betting on the Fed to make the first move.

A bearish outlook for the Euro Zone economy continued to beat down the EUR/USD. This week’s comments from ECB President Mario Draghi, calling for additional stimulus, was the catalyst behind the selling pressure. This is likely to continue next week, making the November 13, 2012 bottom at 1.2660 vulnerable.

The robust U.S. GDP news pressured December Comex Gold prices today, but the market did not make a new low on the daily chart. Yesterday’s closing price reversal bottom was impressive. This could be a sign that the market is bottoming. A close over $1216.60 will put the market higher for the week. This could lead to a rally next week.

November Crude Oil futures also finished higher on Friday. This week’s drawdown in oil supplies seems to have been impressive enough to put the market in a position to change the main trend to up on the daily chart next week. Also helping to underpin the market is the threat to supply in the Middle East due to the escalating military action in Syria.