US: Solid GDP growth may be a fairly goldilocks outcome for markets - ING

In view of analysts at ING it may be up to 2Q US GDP today to realign the markets’ overly bearish expectations about the USD and their economists are looking for an above-consensus +2.8% QoQ annualised print.

Key Quotes

“After President Trump’s first 100 days in office, we concluded that this would be “as good as it gets for the dollar”. While this has proven to be the case, we still remain taken aback by the speed and extent of the dollar’s cyclical decline since the start of the year. Political setbacks have for sure been a factor (more on that in a sec), but the idea that the US economy is on a non-transitory slowing path is a bit misplaced. It may be up to 2Q US GDP today to realign the markets’ overly bearish expectations; our economists are looking for an above-consensus +2.8% QoQ annualised print, largely driven by a rebound in consumption. This should be enough to set investors back on track to pricing in 2% trend growth for the US economy. But with inflation still missing, today’s strong US GDP numbers today may prove to be a fairly goldilocks outcome for global markets – with the broader risk environment remaining buoyant.”

“Long $/JPY would be the best way to play a positive US GDP surprise (target 112). It’s been a busy 24 hours on Capitol Hill; while the Senate failed to push through a ‘skinny’ repeal of Obamacare, there was a memo on tax reforms by the White House and GOP Congress leaders which formally ruled out a border adjustment tax – but put on the table a move towards consumption-based taxes. The redressing of savings incentives in the US could prove to be a long-run positive for the current account deficit and $.”