USD Continues to Progress After Higher US Q1 GDP Revisions
The USD keeps pushing higher in waves, as fundamentals have turned in favour of the Buck recently. Today we had the GDP revisions for Q1 which came positive and lower unemployment claims from the US, while it seems like the debt ceiling issue will be resolved soon. So, the USD hs resumed the bullish momentum and safe havens such as Gold and the JPY are being hammered again.
Gold has fallen below $1,940.00 when the US session opened. This drop in price is attributed to the strength of the US Dollar Index (DXY), which moved above the 10-week high at 104.00. The DXY has been showing significant strength due to unresolved US debt-ceiling issues, despite ongoing negotiations between the White House and Republican leaders.
On the other hand, S&P 500 futures have been holding up well after opening with a bullish gap and are holding the gains. Unlike the weak performance witnessed on yesterday, US equities seem to have not been affected by negative cues. The US Dollar Index (DXY) has also reached its highest point of the day at 103.92 as the uncertainty surrounding the US borrowing cap issues continues to escalate.
US Q1 GDP Report Revisions
- The advance reading was +1.1% vs +2.0% expected
- Q4 final was +2.6% annualized
Details:
- Consumer spending +3.8% vs +3.7% advance
- GDP final sales +3.4% vs +3.4% expected
- PCE prices 4.2% vs 4.2% advance
- Core PCE prices 5.0% vs 4.9% expected (4.9% advance)
- GDP deflator 4.1% vs 4.0% expected
The consumer was stronger than anticipated, leading to a higher revision to Q1 GDP
Percentage point changes
- Net trade was flat at 0.00 pp vs adding 0.11 pp to GDP in advance report and adding 0.46 pp in Q4
- Inventories cut 2.10 pp vs 2.26 pp in advance report and adding 1.46 pp in Q4
- Govt +0.89 pp vs +0.81 pp in advance vs +0.63 pp in Q4
The changes to inventories and gov’t spending go a long way towards explaining the GDP upgrade and they’re not particularly relevant to the underlying economy. The dollar is stronger in the aftermath but I think that’s more about initial jobless claims than GDP.
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