US (SPY) (VOO) real GDP rose at an annual rate of 3.5% in 3Q16, according to the U.S. Department of Commerce’s third estimate on December 22, 2016. The last reading suggested a rise of 3.2% in its second estimate.
How US GDP data could impact oil prices
The GDP rate is one of the most important economic data points that impacts interest rate decisions. The market’s expectation of a rate hike due to the improving economy could strengthen the US Dollar Index (UUP). It could weaken crude oil prices. On the other hand, a strong GDP number could mean higher fuel consumption. It would be bullish for crude oil prices (UCO) (BNO).
US Dollar Index and crude oil
In the past five trading sessions, the correlation between crude oil prices and the US dollar was 82.3%. The correlation is positive. It doesn’t indicate the US dollar’s inverse impact on crude oil prices. However, a weaker dollar makes crude oil cheaper for oil-importing countries—this boosts prices. The opposite is also true.
Impact on energy ETFs
Energy ETFs are also impacted by economic data and the relationship between crude oil prices (USO) (OIIL) (USL) (SCO) (UCO) 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, we’ll discuss the impact of crude oil prices on the S&P 500 Index.