US GDP Misses Mark

The US Dollar continues to soften on Friday as traders digest a weaker-than-forecast advanced GDP print yesterday. The first look at Q1 GDP came in at 1.6%, down from the prior quarter’s 3.4% and well below the 2.5% the market was looking for. At this level GDP growth in the US has fallen back to its lowest levels since early 2022.  Looking at the breakdown of the data, consumer spending weakened sharply via a drop in goods consumption. Government spending was much weaker with exports down also. Non-residential investment was also seen falling.

Data Weakness Showing

While the data does little to bolster near-term rate-cut chances (June meeting priced out now), it does serve as a warning that there are still weaknesses to watch in the US economy. There has been plenty of talk recently regarding the risk that the Fed refrains from easing altogether this year. However, with certain indicators such as this dropping (PMIs both missed earlier in the week too), we need only see a drop in inflation readings to put easing firmly back on the table.

PCE Data Due

Looking ahead today, traders will be watching the latest core PCE data, projected at 0.3% MoM. If we see any undershooting of this forecast today, this will be firmly bearish for USD near-term, driving the dollar lower into next week. However, if we see any upside surprise, this should revive USD buying near-term.

Technical Views

DXY

The rally in DXY has stalled for now ahead of the 107.04 level, price is now turning back down towards the 104.95 level. Bulls need to defend this level to keep the focus on a continuation higher towards 107.04. Below there, 103.48 is next support.