Summary:
- US advance GDP Q/Q: 2.3% vs 2.0% exp
- Prior reading revised higher to 2.9% (from 2.6%)
- USD set for large weekly gains
The world’s largest economy continues to experience a pleasing level of growth according to the latest data, with US GDP for the first quarter coming in at 2.3%. The advance reading is the first of 3 estimates of growth in the period and therefore often has the largest impact – although it can also be prone to notable revisions. Whilst the print is lower than the 2.9% seen last time out, this was at the same time revised up from 2.6% and therefore may be a bit better than it first looks. Furthermore, with consensus forecasts calling for a 2.0% print it is no doubt pleasing and a positive data point.
The overall GDP figure at 2.3% does extend the run of lower readings seen since the 3%+ prints last year but if we look over the past decade it is better than average. Looking more closely at the components weaker consumer spending is one of the chief reasons for the slowdown compared to Q4, with household outlays which rose by just 1.1% pulling back from the 4.0% level seen at the end of last year.
Traders may also view this data from a seasonality perspective with the reading often beginning years in a fairly subdued manner before improving as the year goes on. This has been apparent in each of the last two years and may well be occurring once more.
The data will make for pleasing viewing for USD bulls, who themselves have enjoyed a good week as the buck has made a decisive move higher. The USDIDX has been trapped in a narrow range from 88.30-90.40 for the best part of 13 weeks but the latest move to the upside could signal a major breakout. A symmetrical target of the break could be found at 92.50 (90.40 + 2.1) and this may be something to keep an eye on going forward. Alternatively a break back below 90.40 would negate this move and put the market back under pressure.
The USDIDX has enjoyed a good week and made a decisive break higher after several weeks of consolidation. Source: xStation