US economic growth as an indicator of the dollar's movement

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The US economy slowed less than expected in the fourth quarter, but the decline in consumer and business spending caused the 2018 growth to fall short of the Trump administration's target. The report of the US Department of Commerce for GDP presented an assessment of President Donald Trump's economic policy, which speaks of economics as one of his greatest achievements and stated that his administration "has made an economic turn of historical proportions". As a result, GDP in the fourth quarter increased by 2.6 percent on an annualized basis, after rising 3.4 percent from July to September. In 2018, the economy grew by 2.9 percent, this was the best result since 2015 and better than the 2.2 percent recorded in 2017. Economists polled by Reuters forecast GDP growth at 2.3 percent. Despite the strong performance of the economy in the last quarter and in 2018, there are signs that activity is waning and most production figures will be lower in January and February.

The economy slows down as monetary policy changes, and growth is also held back by a trade war between the United States and China. In addition, the economic outlook is overshadowed by signs of weakening global demand and uncertainty regarding Britain's withdrawal from the European Union. These factors support the "wait-and-see" position of the Federal Reserve in relation to further interest rate hikes this year.

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The dollar reacted positively to the GDP data and compensated for part of the loss against a basket of major currencies, the yield of US Treasury bonds rose. A trade dispute, combined with a strong dollar and weak global demand, holds back exports and forces businesses to accumulate imports, which leads to an increase in the trade deficit.

The material has been provided by InstaForex Company - www.instaforex.com

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