UBS On-Air: Paul Donovan Daily Audio 'A US day today'
At a Glance
The desk sees today's revised US second quarter GDP data as a critical indicator subject to significant revisions, reflecting distortions primarily caused by erratic inventory and export figures. Per the full note source, while consensus expects no changes in overall numbers, the economic trends suggest a dynamic shift, with inventory adjustments likely exacerbating volatility. The emphasis on average GDP figures, which smooth fluctuations, underscores the complex reality of US growth, particularly considering the distortions from trade and policy interventions this year. With the absence of immediate high-impact events in the calendar, this report serves as a focal point for discerning the underlying economic momentum ahead of further data releases.
Key Takeaways
Full Analysis
What the desk is arguing
The desk believes that today’s release of the revised GDP data will reveal considerable insights into the true state of the US economy, particularly how erratic inventory changes and export behaviors play into broader GDP figures. According to Paul Donovan from UBS, there may not be much clarity as the details are likely to reveal disparities due to unreliable data.
Given that the annualization of quarterly growth highlights temporary spikes rather than sustainable trends, the desk posits that a more stable metric might be found through an averaging of the first and second quarters’ results. The GDP data reflect an economy grappling with supply chain challenges and shifting inventory strategies, influenced heavily by tariffs.
Where it sits in our coverage
Our current consensus target for the USD/EUR pair stands at 1.075, with a range spanning from 1.04 to 1.12. Notably, key firms including jpmorgan target 1.10 for March 2026 and bofa sets a more conservative target of 1.04 for the same period.
This outlook aligns with the desk's call as it recognizes potential for upward or downward adjustments based on the GDP revisions and inflation indicators, which could significantly influence positioning and sentiment in the FX market.
How other firms see it
Aligned with the desk's views, jpmorgan and bofa focus on the nuances of the US GDP report, while a more bearish stance is taken by firms that see significant risks in the current data reliability landscape. Collectively, firms that anticipate subdued economic growth patterns are on alert.
Attention will need to be paid to how trajectories unfold for pairs like USD/EUR and USD/JPY, as these may react to both GDP discrepancies and central bank communications in response to incoming data.
Market Implications
Watch the USD/EUR exchange rate closely as the revised GDP data could shift trading sentiment substantially. A figure breaking through 1.075 may signify a stronger US economic outlook, while a drop towards 1.04 could signal retrenchment.
From the original
The US releases revised second quarter GDP data. The market consensus is for no change (given data quality problems, “no change” in the details may be unlikely). US growth has been distorted this year—export and inventory data swung wildly between the first and second quarters. U
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