- 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
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.