The first estimate of 4Q2008 U.S. gross domestic product will be released by the U.S. Department of Commerce’s Bureau of Economic Analysis on 30 January 2009 at 8:30 AM Eastern time, or 11:30 PM Canberra time. Most economic analysts are expecting a drop of at least −4.5 to −5.0% in the fourth quarter of 2008, which would be the most dramatic contraction since the 1982 recession; however, risks are to the downside, and some pessimists have called for contractions of up to −6.5%.

This will be an unusual trading event, as the U.S. dollar has decoupled from most fundamental announcements to fulfill its secondary role as a safe haven currency. In this role, rather than serving as a reflection of the nation’s economy, USD movement in recent months has instead been dominated by repatriation flows and risk aversion as investors seeking to protect their capital from the global recession have moved those funds into the currencies that are perceived to be the most stable, rather than the ones that earn them the highest returns.

If the GDP announcement surprises to the downside, that will increase investor risk aversion, leading to further appreciation of the traditional safe haven currencies such as JPY, CHF, and USD itself, making this one of the few instances where a poor result can actually strengthen the currency in question.

A surprise to the upside, on the other hand, may diminish investor risk aversion and could cause a boost for U.S. stock exchanges and indices; however, that scenario is more likely to cause USD depreciation as investors move their money to higher-yielding currencies such as AUD, NZD, and EUR. After all, the U.S. interest rate remains at 0–0.25% and the FOMC has intimated their willingness to leave it there for much of 2009, which will not encourage investors to park their funds in USD any longer than they believe it to be necessary for reasons of safety.

Forex traders must also consider that much weakness was priced into USD prior to mid-July 2008 and its subsequent appreciation has been an adjustment against other major currencies as their economies began to slide into the global recession. However, this trend has been exacerbated by the above-mentioned safe haven and repatriation flows, and the forex trading market may consider recent USD appreciation to be outdone and its crosses overpriced, particularly against the pound sterling and Canadian dollar.

If the GDP release prints sharply to the downside—say, −6.8% or more—this could overcome the risk aversion theme and see USD fall against the majors. Tuesday’s higher-than-expected German and Eurozone Ifo survey results, although they remain near historic lows, propelled EUR/USD back to the 1.3200 area; coming so soon before the U.S. GDP release, this show of Euro confidence could also weigh on USD.

All forex trading, of course, carries a degree of risk. For this event, traders are advised to keep their stops tight and trailing to minimise losses should the forex trading market move against them. Indicators such as the accelerator oscillator may give some insight into the market’s enthusiasm