US Dollar Mixed After Surprise Q1 Data

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Prior to the release of statistics on personal income, spending, and personal consumption expenditures price data for March, the US dollar was mixed against its main trading partners early on Friday. It was up against the euro and yen and down against the pound and Canadian dollar.

The annualized growth rate in one quarter more than halved from 3.4% to 1.6% (consensus was 2.5%), indicating a significant slowdown in US first-quarter GDP, according to a Friday report from ING.

Interestingly, 2.5% annualized consumer spending fell short of the consensus estimate of 3.0%. The fact that core PCE inflation increased significantly from 2.0% in the fourth quarter to 3.7% QoQ annualized—above the 3.4% consensus—is more significant for the Federal Reserve.

The first look at Q1 GDP on Thursday led to fears of stagflation as economic growth was slower than expected and the price measures accelerated, depressing financial markets. Fed officials remain in their ‘quiet period’ through the April 30-May 1 Federal Open Market Committee meeting.

A quick summary of foreign exchange activity heading into Friday showed that USDEUR fell slightly to 1.0728 from 1.0730 at the Thursday US close but was above a level of 1.0724 at the same time Thursday morning. Eurozone private sector loans rose modestly in March while loans to corporations accelerated, data released earlier Friday showed. The next European Central Bank meeting is scheduled for June 6.

GBPUSD rose to 1.2518 from 1.2513 at the Thursday US close and 1.2509 at the same time Thursday morning. UK consumer confidence improved slightly in April but continued to indicate more pessimism than optimism, data released overnight showed. The next Bank of England meeting is scheduled for May 9.

USDJPY jumped to 156.8281 from 155.6529 at the Thursday US close and 155.5207 at the same time Thursday morning in response to the Bank of Japan holding its target rate steady near zero, offering no clues that further rate increases are imminent, and downgrading its 2024 economic growth forecast in its post-meeting statement overnight. The next BoJ meeting is scheduled for June 13-14. Tokyo consumer prices, an early indicator of overall Japanese prices, slowed their pace in April.

USDCAD fell to 1.3653 from 1.3658 at the Thursday US close and 1.3672 at the same time Thursday morning. Canada manufacturing and wholesale sales data are scheduled to be released at 8:30 am ET. The next Bank of Canada meeting is scheduled for June 5.

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