EUR/USD: Prospects of fresh YTD lows rising along with improving US economy

EUR/USD may drop to fresh year-to-date lows below 1.1176 in the near term, as the recent US economic data releases have pointed to a stronger economy in the first three months than previously expected. 

The consumer spending, as represented by retail sales, surged 1.6 percent in March – the fastest pace in a year and a half – the official data released last week showed. Further, jobless claims hit fresh multi-decade low, meaning consumer spending may remain strong in the coming months. 

The Atlanta Fed's GDPNow tracker, which began the year with a 0.3% projection for the first quarter, rose to 2.8 percent last week following the release of the upbeat retail sales data. 

The official data scheduled for release at 12.30 GMT on Friday is expected to show the economy expanded at an annualized rate of 1.5 percent in the first three months of 2019, having registered a growth rate of 2.9 percent in the final three months of 2018. 

The 1.0% discrepancy between the general forecast and the Atlanta Fed’s GDPNow projection of 2.8% leaves a great deal of room for a  better than expected performance, according to FXStreet Analyst Joseph Trevisani. 

The FX markets could price in the possibility of an above-forecast US GDP in the run-up to Friday’s release by sending the greenback higher across the board. 

EUR/USD is already trading on the defensive,  having dived out of a bullish channel last week and could print fresh year-to-date lows below 1.1176 this week. 

The Eurozone PMIs released last week showed the manufacturing activity in the 17-nation economy deteriorated in April. So, the EUR bulls are unlikely to step in to defend the recent lows. 

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