- Yesterday was a rollercoaster ride for the US dollar as month end corporate buying initially pushed the greenback higher before selling off a touch in the afternoon. GDP data showed that the US economy grew at a slower pace in the first three months of the year than initially suggested, reflecting softer consumer spending. GDP rose 1.3% annualised in Q1, below the previous estimate of 1.6%, with the economy’s main growth engine, personal spending advancing 2.0% against the 2.5% previously estimated. Consumer spending, particularly witness in auto sales, reflected the impact of higher interest rates on American household spending.
- Markets continue to listen to ongoing Fed speak for clues on when the central bank may be able to cut rates, with New York Fed President John Williams yesterday saying that he expects inflation to continue falling in the second half of the year. As witnessed in yesterday’s data, he added that elevated borrowing costs are restricting the economy. Sticking to the recent tone of his Fed colleagues, he added that he could not say when he would likely support a rate cut, emphasising that it would depend on what upcoming data told him about the economy.
- This morning, markets look forward to the release of euro area CPI, which may have an impact on the ECB’s interest rate decision next week. The single currency has drifted lower against the greenback over the course of the week, slipping from resistance just below 1.09 to bounce off support at 1.0790 to consolidate in the low 1.08’s ahead of the inflation report.
- This afternoon the attention shifts back to the US as traders anxiously await the PCE data. The Fed’s preferred inflation gauge is expected to moderate to its lowest pace this year, with markets looking for some encouraging signs that the recent disinflationary signs haven’t totally stalled.
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