US GDP Grew by 4.3%
The US Bureau of Economic Analysis reported on Thursday that real GDP in the fourth quarter grew by 4.3% for the year. This value was better than the previous estimate and the market's expectation of 4.1%. The initial market reaction to this report was largely subdued, although the dollar gained strength in the future. The upward revision mainly reflected an increase in investment in company stocks. At the same time, there was a downward revision of investment in fixed assets in the industrial sector. The increase in real GDP reflected an increase in exports, investment in fixed assets in the non-residential sector, spending on personal consumption, investment in fixed assets in the residential sector and investment in inventory.
Fed Vice Chairman Richard Clarida said on Thursday that the risks of a weak economy have significantly decreased, although the US labor market will need some time to return to pre-crisis highs. According to Clarida, the Fed will support the recovery until the indicators fully recover. The US economy is now much more resilient than predicted a year ago, which is reflected in the currency markets. The current unemployment rate is closer to 10%. Inflation is expected to rise this year, and return to 2% in 2022-2023 on the back of a collapse in prices in 2020, as well as due to pent-up demand. The expected trajectory of inflation is fully consistent with the new structure of the Fed.
I predict a decline in the Euro against the US Dollar to 1.1700.