US dollar slumps as US GDP disappoints

The US dollar tumbled on Thursday, after the US reported a sharper-than-expected slowing of growth in the third quarter.

Meanwhile, the pound is mostly muted so far this morning, with GBP/EUR flat at €1.1812 and GBP/USD subdued at $1.3785. GBP/CAD is rangebound at C$1.7031, while GBP/AUD and GBP/NZD hold steady at AU$1.8290 and NZ$1.9203 respectively.

Looking ahead, will a slowing of growth in the Eurozone’s latest GDP figures weigh on the euro this morning?

What’s been happening?

The US dollar retreated during yesterday’s session after the latest US GDP estimate printed below forecasts.

The preliminary figures sapped USD demand, after revealing that the US economy expanded by just 2% in the third quarter, down from 6.7% in Q2 and missing forecasts for a 2.7% expansion of growth.

The euro, meanwhile, traded with modest gains on Thursday, following the European Central Bank’s (ECB) latest interest rate decision.

While the ECB left rate on hold as expected, President Christine Lagarde acknowledged that inflation in the Eurozone is likely to run hotter for longer than it previously forecast, giving rise to some speculation the bank made need to tighten its monetary policy sooner than previously thought.

At the same time, the pound struggled to attract much support yesterday amidst fresh Brexit jitters, with fears that tensions between the UK and EU could escalate following a spat over fishing rights for French vessels.

What’s coming up?

In the spotlight today will be the publication of the Eurozone’s own GDP release.

The latest figures are forecast to report a modest slowing of economic growth in the third quarter, which could place some pressure on the euro this morning.

Also in focus for EUR investors will be the Eurozone’s consumer price index. October’s preliminary release is expected to report another acceleration of inflation, but given the ECB’s continued dismal of inflation concerns, it may have a limited impact on the euro.

On the other side on the pond, the publication of the latest PCE price index could send the US dollar higher, if the Federal Reserve’s preferred indicator for inflation reports another acceleration of price growth.

Meanwhile, the continued absence of any notable UK economic data could leave the direction of the pound to continue to be driven by Brexit uncertainty.