The US Q2 GDP print was noteworthy for two reasons. The good news was that the release allayed fears of weaker growth especially at the start of the year. Adding to that was the PCE deflator that signalled growing inflation pressure in Q2. The not so good news was the downward revision of the US growth data going back till 2011. These were consistent with the view that the trend speed of the US economic recovery remained frustratingly low.
So, if you think that US trend growth is lower, should you buy or sell the USD? We believe that the latest data is still supportive for the USD. Indeed, a more shallow economic recovery, plagued by low labour productivity, should see wage and cost pressures picking up more quickly as spare capacity is used up. The Fed's response to that should be earlier hikes and a gradual tightening cycle, with policy rates peaking earlier than usual. Yesterday's GDP data effectively confirmed Fed’s view on the economy and, by implication, strengthens the case for earlier lift-off, potentially as soon as September.
Today's US data could be quite important as well with market focus likely to be on the Employment Cost Index (ECI) - easily the most comprehensive measure of wages in the economy. Evidence of further ECI growth would be consistent with mounting wage pressures against the background of subdued trend economic growth and dissipating slack in the labour market. In turn, it would strengthen the case for lift-off sooner rather than later. USD could extend its gains broadly with markets also positioning ahead of the all-important NFP release next week.
'This content has been provided under specific arrangement with eFXnews.'
eFXnews is a financial news and information service. Articles and other information distributed in this service and published on this site are provided in general terms and do not take account of or address any individual user's position. To the extent that some of these articles include suggestions as to various possible investment strategies which users might consider, they do so in only general terms without reference to the personal factors which should determine any user's investment decisions to buy or sell a specific security or currency.
The service and the content of this site are provided and distributed on the basis of “AS IS” without warranties of any kind either, express or implied, including without limitations, warranties of title or implied warranties of merchantability or fitness for a particular purpose. eFXnews and its employees, officers, directors, agents, and licensors do not also warrant the accuracy, completeness or timeliness of the information in any of the articles and other information distributed in this service and included on this site, and eFXnews hereby disclaims any such express or implied warranties; and, you hereby acknowledge that use of the service and the content of this site is at you sole risk.
In no event shall eFXnews and its employees, officers, directors, agents, and licensors will be liable to you or any third party or anyone else for any decision made or action taken by you in your reliance on any strategy and/or advice included in any article and other information distributed in this service and published in this site.
Recommended Content
Editors’ Picks
EUR/USD hovers near 1.0700 even as USD struggles ahead of data
EUR/USD has erased gains to trade flat near 1.0700 in the European session on Thursday. The pair comes under pressure even as the US Dollar struggles, in the aftermath of the Fed policy announcements and ahead of more US employment data.
GBP/USD turns south toward 1.2500, US data eyed
GBP/USD is consolidating the rebound above 1.2500 in European trading on Thursday. The pair struggles, despite the US Dollar weakness on dovish Fed signals. A mixed market mood caps the GBP/USD upside ahead of mid-tier US data.
Gold price pulls back as market sentiment improves
The Gold price is trading in the $2,310s on Thursday after retracing about three-tenths of a percent on reduced safe-haven demand. Market sentiment is overall positive as Asian stocks on balance closed higher and Oil prices hover at seven-week lows.
Top 3 Price Prediction BTC, ETH, XRP: Altcoins to pump once BTC bottoms out, slow grind up for now
Bitcoin reclaiming above $59,200 would hint that BTC has already bottomed out, setting the tone for a run north. Ethereum holding above $2,900 keeps a bullish reversal pattern viable despite falling momentum. Ripple coils up for a move north as XRP bulls defend $0.5000.
Happy Apple day
Apple is due to report Q1 results today after the bell. Expectations are soft given that Apple’s Chinese business got a major hit in Q1 as competitors increased their market share against the giant Apple.