Talking Points:

- US GDP for Q2’16 rose in the third revision and Initial Jobless Claims beat expectations.

- US Personal Consumption ticked down but remained strong.

-USD/JPY rises as the USD strengthens on the news.

Q2’16 US GDP was revised up to +1.4% versus an expected reading of 1.3%, suggesting that fears a slip in US growth midyear can be calmed for now. Elsewhere, Personal Consumption ticked lower from 4.4% to 4.3%. While still tepid, US growth wasn't as slow as feared in Q2'16, which in turn, should give the Fed more confidence in its ability to raise rates by the end of this year. Fed forecasts for Q3 GDP are showing a rebound, with the Atlanta Fed’s GDPNow looking for +2.8% growth and the New York Fed’s Nowcast projecting +2.3%.An important but often overlooked inflation data point is the GDP Price Index, which does not include changes in import prices, is up +2.3% on the year.

Initial Jobless Claims were strong and remained at trend, coming at 254k versus expectations of 260k, and a previous reading of 251k. Continuing claims also beat expectations at 2062k, versus expectations of 2129k. Jobless claims and job reports will play key roles in the months coming up to the Fed’s November and December meetings.

Chart 1: USD/JPY 1-minute Chart: September 29, 2016 Intraday

(Click on image to enlarge)

In an immediate response to the data, the US Dollar rose against the Yen, as the USD/JPY rose to 101.630 from 101.411, and as high as 101.785. The pair seemed to settle near 101.700. With FX volatility edging higher again, it’s the right time to review risk management principles to protect your capital.