What the US GDP Suggests for Crude Oil Prices




Preliminary estimates pegged US (SPY) (VOO) GDP growth at 1.1% in 2Q16, according to the second reading by the U.S. Department of Commerce on August 26, 2016. The first advance reading had indicated a rise of 1.2% in US GDP for 2Q16.

The GDP growth rate is one of the most important economic data points impacting interest rate decisions. The market’s expectation of a rate hike could strengthen the US Dollar Index (UUP). This could weaken crude oil prices. Since the preliminary GDP figure rose less than the first reading, it could delay the Fed’s timing for the next rate hike.

On the other hand, a soft GDP number could mean lower fuel consumption. This would be bearish for crude oil prices (USO) (BNO).

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Impact on energy ETFs

Energy ETFs are also impacted by economic data and the correlation between crude oil prices (UWTI) (USO) (OIIL) (USL) (SCO) (DWTI) and the US Dollar Index. These ETFs include the Direxion Daily Energy Bear 3X ETF (ERY), the First Trust Energy AlphaDEX ETF (FXN), the United States Brent Oil ETF (BNO), the Energy Select Sector SPDR ETF (XLE), and the United States Oil ETF (USO).

In the next part of this series, we’ll look at the weather forecast and see how it could impact natural gas prices.


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