US Dollar Could Gain on Q3 GDP

Points to consider in this Forex article:

• Unimpressive risk appetite in Asian trading today. China hints towards more economic stimulus.
• AUD and NZD currencies rise and US yields moved lower after Fed rate hike.
• US Dollar could move higher after the third quarter gross domestic data (Q3 GDP) release.

Both the AUD/USD and NZD/USD outperformed in early Asian trading today. China hinted at more economic stimulus which supported these advances along with falling US yields. Early this morning, China’s Xinhua News Agency reported that Beijing supports more “forceful” fiscal policy to stimulate their economy along with a more “flexible” monetary policy to aid with structural reforms. These comments were made at the Central Economic Work Conference today by China’s president.

During Asian trading, Asian markets were very quiet. Investors are a bit doubtful with China’s remarks on “risk-on” appetite. However, the Aussie and Kiwi Dollars, which had been trading strong thanks to lower front-end US Treasury yields, advanced higher this morning. US yields have been moving lower since last week’s Fed policy decision. The 2 year Treasury rate is at 1.0167 percent. This is why we are seeing a flight to higher yields in the Forex market.

US Set to Release Q3 GDP Data

The US will soon release their Q3 GDP data. Expectations are for an annual growth rate at 1.9 percent. This could come out near 2.1 percent. If it beats expectations, the US Dollar could find some support and rebound. Traders will also eye this number to help gauge further tightening by the US Federal Reserve in 2016.

Investors are expecting two rate hikes next year. Janet Yellen stated the Fed could raise rates 4 times next year, which seems a bit excessive. This means markets are more than likely to be sensitive to upside surprises with economic data releases. This means the AUD and NZD currencies could be capped and the USD could find support.