US GDP data could hit the dollar

The dollar continues to consolidate at the top and can’t develop a corrective movement that has matured for a long time. In this regard, today's data on US GDP for the second quarter (preliminary) may well play the role of a trigger.
On the one hand, the data is expected to be simply magnificent: according to different estimates, the growth rate will be 4.0-4.2%. For the largest economy in the world, this is a phenomenal result. The last time such rapid growth was observed in late 2014. There are reasons for such an impressive pace. This is the effect of the Trump tax reform, and the seasonal factor, and the overall good state of the US economy, and the potential positive effect for the US trade balance of the Trump trade wars.

The dollar should only be bought on a such background. But we believe that everything is not so unambiguous. To begin with, the figure of 4% is already considered in the price and by and large the surprise does not bear. But any estimates below 4% may well provoke investors' disappointment and lead to local dollar sales.

Are there any grounds for expecting weaker estimates? Judging by the fact that a few analysts just lowered their forecasts on the eve of the publication, they are there. Recall, one of the reasons for the sharp acceleration of GDP growth, the US was called the reduction in the US trade deficit because of Trump's protectionist policy. So yesterday, data on the US trade balance were published. Unexpectedly for many, the deficit not only did not decrease, but also grew quite sharply (from $ 64.85 billion it increased to - $ 68.33 billion). As a result, a few leading analysts lowered their forecasts (as a result, the median expectation dropped from 4.2% to 4.1%). For example, JP Morgan lowered its forecast from 4.4% to 3.9% (!). In our opinion, this is a very serious signal in favor of the fact that the dollar today may be subject to sales. Analysts' anxiety was caused both by the data on the trade balance and durable goods inventories.

It is also not worth writing off Trump's factor - his recent attacks on the Fed (dissatisfaction with tight monetary policy), as well as a strong dollar worried investors and traders. And accordingly, several shook the groundl under the feet of the dollar.

So, we continue to recommend selling the dollar while it's on the top. But at the same time, of course, do not forget to monitor the data.