U.S. GDP for Fri 26th April

0853 GMT [Dow Jones] The market is probably well prepared for US 1Q '07 GDP to come in at +1.8%, well lower than +2.5% in the 4Q '06, but the market is now focusing on the 2Q and it this which could inflict real damage on the USD. While the 1Q data is expected to show the consumer remains strong and the rest of the economy weakening, 2Q numbers should show a reverse, says ING Financial Markets. "The outlook isn't going to be much better for 2Q since consumption is likely to be significantly weaker," the bank says. "This suggests that the USD will remain under downward pressure for some time yet." (NEH)

A better than expected reading should see the dollar edge up towards 1.3550 against the €, whereas a weaker number should clear for a imminent movement beyond 1.3666. Which strategy do you favor?

Q1 advance GDP was significantly below expectation at 1.3% vs. 1.8%E.

This is a very weak reading on the headline, but the details aren't
quite as bad.

Consumer spending rose 3.8%, and nonresidential investment actually
rose
after falling in the previous quarter, rising 2.0%.

The big drags on growth were residential investment, which fell 17%,
government spending which only rose 0.9%, and trade, which was a larger
than expected drag on growth.

Market implications:
Even though the details are not as bad as the headline, this report is
still weak, and represents the fourth consecutive quarter of 2.6%
growth
or lower, and is a significant decleration from the 2.5% growth in Q4.
The drags from housing and inventories may persist longer than
expected.

For FX, this should continue to weigh on the USD, and be mildly
supportive for risky assets. Weaker growth should be good for risky
assets as it brings down inflation. However, if perceptions about
growth
weakening too much grow, that would not be good for risky assets. That
being said, given that the details of this report are not quite as bad
as the headline, this should continue to reinforce the soft landing
environment for the US, which is good for risky assets and bad for the
USD.