US preliminary estimate of Q1 GDP is due for release today. The growth rate is seen coming-in at 0.6% compared to previous quarter’s growth rate of 1.4%.
Q1 slowdown is seasonal
That is a marked slowdown; however, note that Q1 is usually the weakest in the US and strongest in Eurozone. Plus, the recent slowdown is well know and pretty much priced-in. Fed’s dovish tilt following December’s rate hike was largely due to domestic slowdown amid oil prices sell-off and heightened risk from global developments.
Hence, markets are unlikely to worry much unless the GDP print is weaker-than-expected. Moreover, the possibility of a better-than-expected GDP figure is high, given the goods trade deficit narrowed sharply in March.
Furthermore, Fed’s favorite gauge of inflation – core personal consumption expenditure – is seen taking a big leap from Q4 2015 print of 1.3% to 1.9%. Anything just shy of estimates or higher-than-estimates could keep dollar bulls happy.
Also note – Bank of Japan’s (BOJ) status quo policy today may have put a temporary end to global mad rush towards negative rates. For Fed, this is good news since other central banks standing pat makes it easy for Fed to move rates higher. This again is supportive for US dollar.
Now we look at EUR/USD pair, which has failed to capitalize on the bullish break seen on the hourly chart.
Q1 slowdown is seasonal
That is a marked slowdown; however, note that Q1 is usually the weakest in the US and strongest in Eurozone. Plus, the recent slowdown is well know and pretty much priced-in. Fed’s dovish tilt following December’s rate hike was largely due to domestic slowdown amid oil prices sell-off and heightened risk from global developments.
Hence, markets are unlikely to worry much unless the GDP print is weaker-than-expected. Moreover, the possibility of a better-than-expected GDP figure is high, given the goods trade deficit narrowed sharply in March.
Furthermore, Fed’s favorite gauge of inflation – core personal consumption expenditure – is seen taking a big leap from Q4 2015 print of 1.3% to 1.9%. Anything just shy of estimates or higher-than-estimates could keep dollar bulls happy.
Also note – Bank of Japan’s (BOJ) status quo policy today may have put a temporary end to global mad rush towards negative rates. For Fed, this is good news since other central banks standing pat makes it easy for Fed to move rates higher. This again is supportive for US dollar.
Now we look at EUR/USD pair, which has failed to capitalize on the bullish break seen on the hourly chart.
- A move above 1.1372 is what is required now for fresh bids to come-in and fuel rally towards 1.14+ levels.
- Moreover, it would take a surprisingly weak GDP and core PCE figure to push EUR/USD near to 1.1440-1.1465 levels.
- On the other hand, failure to capitalize on the bullish break on hourly charts means the pair is more vulnerable to strong US data. A drop to 1.1295 could happen, however, bears need an hourly close below the same.