Currency Analyst since 2010

USD: revised GDP changed the game?

The greenback may strengthen if US weekly unemployment claims are better than expected as the Fed will focus on jobs data to make decision about tapering monetary stimulus.

Analysts at ING think that US 10-year yields are taking a breather at 2.50/60% as the market players are waiting for more “heavyweight data” like non-farm payrolls (NFP) numbers and ISM PMI due next week. The specialists are bullish on USD and bearish on EUR as the recent comments from ECB policymakers have been fairly dovish. Deutsche Bank’s traders also added to their USD longs versus JPY, EUR, AUD and GBP. 

Yesterday US Q1 economic growth was revised down from 2.4% to 1.8%. The revision was due largely to slower growth in consumption, which eased to a 2.6% gain from the earlier estimate of 3.4%.

On the one hand, forward economic indicators hint that American economy has gained more in the Q2 – so there’s still ground for expectations that the Fed will trim QE. On the other hand, Barclays warns that growth in the second quarter could have been restrained by across-the-board federal spending cuts that began in March. As a result, we expect USD to strengthen, but think that its upside potential will remain limited because of persisting uncertainty about US growth outlook. The advance reading of American Q2 GDP will be released only on July 31, just ahead of the Fed’s meeting.  

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