USD Jumps on Higher Q1 GDP Revisions to 2.0%

With Federal Reserve Chair Jerome Powell’s appearances at the ECB forum and at the Bank of Spain meeting already behind us, traders focused on two economic reports. The first report, which is of significant importance, was the last revision of the US Gross Domestic Product (GDP) for Q1. The latest GDP reading came in at 2.0%, which is a significant improvement from the previous figure of 1.3%. Expectations were for a more modest revision higher to just 1.4%. This strong GDP result provides additional support for the US dollar, which sent Gold diving around $20 lower to $1,893.

Furthermore, there were positive developments in the jobs market as well. Both Initial Jobless Claims and Continuing Claims showed substantial drops. Initial claims decreased from 264K to 239K, while continuing claims declined from 1,759K to 1,742K. These figures alleviate some concerns of a potential recession and help bolster the US dollar.

Risk currencies also took a dive, so we decided to open a sell forex signal in NZD/USD. Gold did fall below $1,900, but it has made quite a reversal since then. Although, we opened a sell Gold signal as well above $1,910, as buyers are showing signs of exhaustion.

Final US GDP Revisions for Q1

• US Q1 final GDP +2.0% vs +1.4% expected
• Preliminary reading was +1.3%
• Final Q4 reading was +2.6% (unrevised)
• Consumer spending +4.2% vs +3.8% 2nd reading
• Core PCE prices +4.9% vs +5.0% expected
• PCE prices % vs +4.2% 2nd reading
• GDP final sales +4.2% vs +3.4% 2nd reading
• Corporate profits after tax -5.9% vs -6.8% 2nd reading and -2.7% in Q4
• Consumer spending on durables +16.3% vs -1.3% in Q4

Percentage point changes

• Net trade +0.58 pp vs flat in prelim report and adding 0.46 pp in Q4
• Inventories cut 2.14 pp vs at cut of 2.10 pp in prelim report and adding 1.46 pp in Q4
• Govt +0.85 pp vs +0.89 pp in prelim report and +0.63 pp in Q4

So much for the recession. It’s a bit of a shock that economists missed this one so badly.