- US GDP came out at 2.2% against 2.4% expected.
- The US economy continues looking better than its peers.
- While Q1 was probably worse due to the shutdown, the greenback can gain.
US growth is back to the new normal: 2.2% annualized, bang in the middle of the "new normal" or "new mediocre" if you wish: 2-2.5%. Q4 growth follows two robust quarters beforehand, high growrth that was fueled by Trump's tax cuts. The fiscal stimulus effect is off, and now it's back to unimpressive growth.
But while the US economy slowed down in Q4 2018, it outperformed its peers which endured more significant slowdowns. The euro-zone saw only 0.2% QoQ or 0.8% YoY, and so did the UK. The central banks in Canada, Australia, and New Zealand all made dovish shifts alongside the ECB.
The US Dollar remains the cleanest shirt in the dirty pile. It enjoys two advantages.
First, the greenback is the world's reserve currency and a safe-haven one. Investors flock to the safety of the dollar in times of trouble, and these are times of trouble.
Secondly, the US economy is growing at "Goldilocks" levels, not for the US economy, but the greenback. On the one hand, the world's No. 1 economy is not growing too slowly to trigger immediate rate cuts by the Fed, moves to weaken the dollar. On the other hand, it is not growing fast enough to pull the rest of the world forward.
The GDP data confirm this status. But what currencies can the greenback gain against? The euro looks like a good candidate. The yen is also a safe-haven, making it hard for the dollar to gain against. Trading in the British pound is plagued by Brexit. It is nearly impossible to assess how Brexit will end, making Sterling roughly untradable.
However, EUR/USD did not fall too fast despite the slowdown in Germany and the ECB's dovish shift. The fall in EUR/USD does not reflect that, especially after the forward-looking German Manufacturing PMI plunged to recessionary levels.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
USD/JPY advances toward 149.50 ahead of crucial BoJ policy decision
USD/JPY is rising toward 149.50 in the Asian session on Tuesday, picking up fresh bids. Traders keenly await the highly-anticipated Bank of Japan policy decision. The BoJ's outlook on the negative interest rate policy and the Yield Curve Control (YCC) will play a key role in influencing the Japanese Yen.
AUD/USD creeps lower to test 0.6550 ahead of RBA’s decision
AUD/USD is grinding lower to test the 0.6550 level in Asian trading on Tuesday. The Aussie Dollar stays on the defensive against the US Dollar as markets prepare for the Reserve Bank of Australia's extended pause but the Bank's rate outlook will hold the key.
Gold stays afloat despite high US yields as traders focus on Fed policy
Gold sees a modest increase, as investors watch this week's central bank meetings. Focus remains on the Federal Reserve, where a hawkish stance could potentially impact XAU/USD price while bolstering the US Dollar.
Avalanche price could rise 20% on gaming narrative ahead of GDC conference
Avalanche is an outlier on Monday, rallying while the broader market is crashing. It has outperformed Bitcoin price, as well as meme and AI crypto coins, sectors that have been thriving of late.
Australia Interest Rate Decision Preview: RBA set to stand pat after discussing rate hikes in February
The Reserve Bank of Australia is widely expected to hold the Official Cash Rate steady at a 12-year high of 4.35% following the conclusion of its March monetary policy meeting on Tuesday. The decision will be announced at 03:30 GMT.