Q3 GDP No Barrier to QEII

Q3 US GDP rose 2%, in line with the expectations which had drifted slightly higher in recent weeks. Consumption contributed 1.8 percentage points to growth and auto output added 0.4 percentage points to growth. Inventories added 1.4 percentage points, while net exports subtracted 2 percentage points. Business spending on equipment and software remained strong rising 12%, but that is half the pace seen in Q2. Residential construction spending fell at a 29% annualized pace after rising at nearly a 26% pace in Q2. The core PCE deflator rose 0.8% after a 1% increase in Q2.

The dollar has traded heavily in the wake of the GDP report as European operators had begun covering intraday shorts prior to the data and it has continued since the GDP figures. Short-term operators dominate ahead of next weeks events. Remaining on tap today is the Chicago PMI and Univ of Michigan consumer confidence. Euro resistance is seen near $1.3950 and sterling is approaching $1.60. The market seems reluctant to push the dollar too close to JPY80.