US GDP weak? No problem!
The dollar shrugged off the lower-than-expected growth number for the first quarter of the year and still managed to rise against its peers.
What's up with that?
We take a closer look at their reactions:
Titles:
- GfK German Consumer Climate Index for April: -24.2 (-25.9 expected, -27.3 previous)
- Bank of England sales for April: -44 (-2 expected, +2 previous)
- Forward US GDP Q1 2024: 1.6% q/q (2.5% expected, 3.4% prior)
- Advanced US GDP Price Index Q2 2024: 3.1% q/q (3.0% expected, 1.6% prior)
- US Initial Jobless Claims: 207K (214K expected, 212K previous)
- US March Initial Wholesale Inventories: -0.4% m/m (+0.2% expected, +0.4% previously)
- US Pending Home Sales for March: 3.4% m/m (0.3% expected, 1.6% previous)
- UK GfK Consumer Confidence Index for April: -19 (-20 expected, -21 previously)
- Tokyo core CPI for April: 1.6% y/y (2.2% expected, 2.4% previous)
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
Major asset classes saw a relatively lackluster Asian trading session on Thursday, with the exception of Bitcoin, with market players likely warming up ahead of the expected advance US GDP.
Gold briefly fell below the key $2,300 area but eventually rose in the London trading session while the dollar had a slight bearish bias.
The headline US GDP reading came in below estimates, indicating an expansion of 1.6% on a quarterly basis for the first quarter of 2024 versus the expected figure of 2.5% and previous growth of 3.4%. However, as stated on our website Events guideinvestors paid more attention to the inflation-linked GDP price index.
The advanced GDP price index nearly doubled from the quarterly increase of 1.6% in the previous period to 3.1% in the first quarter, while the core personal consumption expenditures price index for the same quarter fell at 3.7% versus the expected figure of 3.4%, raising the high level of the first quarter of General. Personal consumption expenditures price index for March Scheduled Friday.
The S&P fell in response while Treasury yields rose on stronger prospects that the Fed may delay easing plans. Meanwhile, crude oil and Bitcoin were also hit by risk-off flows.
Forex market behavior: US dollar against major currencies
Overlay of the US dollar against major currencies Chart by TradingView
Price action between the major forex pairs was skewed from the start, with the USD/JPY pair rising steadily before accelerating higher after breaching the closely watched 155.00 barrier.
As it turns out, the lack of intervention among Japanese officials when the currency pair broke through another strong technical barrier was enough to encourage more yen traders to exit.
Meanwhile, the franc regained most of its previous gains and joined the rest of its peers in sliding against the dollar ahead of the US GDP release, despite the lack of Swiss catalysts.
The British pound, New Zealand and Australian dollars were holding on to very good gains against the US currency just before the growth report was printed, but also ended up giving in to the strength of the dollar when inflation numbers for the quarter beat expectations.
The rally was short-lived and profit-taking was rapid, leaving the dollar to give back most of the gains and retreat to pre-GDP levels by the end of trading hours in New York.
The USD/JPY pair looked firm around the release, with traders likely bracing for Tokyo's core CPI and the Bank of Japan's decision scheduled for the next trading session.
Potential catalysts coming on the economic calendar:
- Australian import prices quarter-on-quarter at 1:30am GMT
- Australian Producer Price Index Q/Q at 1:30 AM GMT
- The Bank of Japan's monetary policy decision, forecast report, and upcoming press conference
- SNB President Jordan Speech at 8:00 AM GMT
- Core US PCE price index at 1:30pm GMT
- US personal income and spending data at 1:30pm GMT
- UoM revised its Consumer Confidence Index at 2:00 PM GMT
Japanese Yen pairs may see volatile movement in the next few hours, as market participants wait patiently Monetary policy decision of the Bank of Japan. After all, this particular announcement comes with the central bank's updated forecasts for growth and inflation, and will likely set expectations for future policy actions. Keep an eye out for potential jaw-drops too!
later in the day, US core personal consumption expenditures price index This is bound to shake things up in the New York session, as the Fed's preferred measure of inflation could make or break accommodative expectations.
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