US dollar ticks up as US GDP beats forecasts
Philip McHugh July 26th 2024 - 2 minute read
The US dollar strengthened on Thursday afternoon following a better-than-forecast US GDP report.
Meanwhile, trade in the pound is mixed so far this morning, with GBP/EUR and GBP/USD wavering at €1.1857, $1.2863, respectively. GBP/CAD is also rangebound at CA$1.7771, while GBP/AUD retreats to AU$1.9621 and GBP/NZD is subdued at NZ$2.1807.
Looking ahead, will cooling US inflation see the ‘greenback’ relinquish its recent gains later today?
What’s been happening?
The US dollar recouped some of its recent losses yesterday afternoon following a stronger-than-forecast GDP report. Growth in the US economy was up 2.8%, compared to market projections of a more modest 2% expansion.
However, an unexpected drop in US durable goods orders last month served to cap USD’s upside potential, with new orders plummeting by 6.6%.
Meanwhile, the euro firmed against the majority of its peers despite an underwhelming German IFO business climate index. While the index fell to its lowest levels since February risk-averse market sentiment lent the safe-haven single currency support.
The pound faced headwinds on Thursday, firming expectations that the Bank of England (BoE) will lower interest rates next week pressured GBP exchange rates. A Reuters poll found that a majority of economists continue to favour August for the central bank’s first rate cut since 2020.
What’s coming up?
Turning to today’s session the focus will be on the latest US inflation data. The core PCE price index is due for release this afternoon and is expected to reveal further signs of modest US disinflation.
As the Fed’s preferred gauge of inflation, any signs of further inflationary easing may see increased Fed rate cut bets sink the ‘greenback’.
For the euro, the bloc’s latest consumer inflation expectations could attract investor interest amid a lack of high-impact releases. Should the European Central Bank’s (ECB) survey continue to waver close to a three-year low, EUR could relinquish its recent gains.
In the absence of any fresh UK data, could global risk dynamics and ramped-up BoE rate cut bets drive GBP movement?
Written by
Philip McHugh