Gross Domestic Product (GDP) measures the total value of all goods and services produced within a country’s borders during a specific period, typically quarterly or annually. GDP serves as the primary indicator of economic size and growth, significantly influencing currency values, interest rates, and market sentiment. GDP data releases are major market-moving events closely watched by traders.

GDP growth rates indicate economic expansion or contraction, affecting monetary policy decisions, investment flows, and currency strength. Strong GDP growth typically supports currency appreciation and stock market performance, while weak growth may prompt central bank stimulus measures. Traders use GDP data to assess economic trends and position for policy changes and market movements.

Real-world example: U.S. GDP growth of 3.5% versus 2.8% expected causes USD to strengthen and Treasury yields to rise as traders anticipate more aggressive Federal Reserve policy tightening to manage economic overheating.