US GDP Quick Analysis: Goldilocks number for the USD and why it can gain most against the euro


  • 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.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD: traders set to position ahead of Fed

The EUR/USD pair moderated its advance on Friday, compliments to stronger-than-expected US data, finishing the week anyway with gains around 1.1070. Better-than-expected US data released Friday brought relief to USD bulls.

EUR/USD News

GBP/USD: Brexit optimism keeps bulls in the drivers’ seat

The GBP/USD pair has advanced for a second consecutive week, reaching Friday 1.2505, its highest since last July, and settling not far below this last. Fading odds for a hard-Brexit continue to underpin the Pound.

GBP/USD News

USD/JPY: further gains depending on risk-related sentiment

The USD/JPY pair settled above the 108.00 level for the first time since late July, closing substantially higher for a third consecutive week.  Demand for the safe-haven yen continued to be undermined.

USD/JPY News

The good, the bad and the extremely ugly crypto

XRP is in a borderline situation and with little room for doubt. Bitcoin demonstrates its power and positions itself as the emerging leader. Ethereum is in an intermediate situation, far from risk but also from opportunity.

Read more

Gold: Down for third straight week, on the defensive ahead of the Fed

Gold is set to end lower for the third straight week and will likely remain on the defensive in the run-up to Wednesday's Federal Open Market Committee (FOMC) meeting. A dovish surprise will likely put a strong bid under the yellow metal.

Gold News

Forex Majors

Cryptocurrencies

Signatures