The EUR to USD rate continued higher yesterday, remaining above 1.07, driven by disappointing USD weakness after soft manufacturing and services PMI readings earlier in the week. That led to markets thinking that it might alter the outlook for the Federal Reserve, which increased the importance of today’s GDP figures.

Economists are estimating that the economy grew at a 2.20% annual rate in the first quarter of this year. This follows a consistent trend of GDP growth, with the economy expanding by at least 2% per quarter since the second half of 2022. The streak includes a robust 4.9% reading last autumn. Notably, if the first quarter’s growth surpasses 2%, it would mark the seventh consecutive quarter of such growth, representing the strongest streak in 20 years. This growth has occurred despite the Federal Reserve’s efforts to raise interest rates to their highest level in more than 2 decades.

EUR/USD Chart Daily – A Bearish Reversing Pattern Formed Yesterday

US Q1 GDP Report

• Q1 advance GDP +1.6% vs +2.4% expected
• Weakest since Q1 2023
• Final Q4 reading was +3.3% annualized (revised to +3.4%)
• Q3 was +4.9% annualized

Details:

• Consumer spending +2.5% vs +3.3% prior
• Consumer spending on durables -2.1% vs +3.2% prior
• GDP final sales 2.0% vs +3.9% prior
• GDP deflator 3.1% vs 3.0% expected (1.7% prior)
• Core PCE +3.7% vs +3.4% expected (+2.0% prior)
• Business investment +3.2% vs +0.7% prior

Percentage point changes:

• Net trade pp -0.86 vs +0.32 pp prior
• Inventories -0.37 pp vs -0.47 pp prior
• Govt +0.21pp vs +0.79 pp prior

EUR/USD Live Chart