Daily Market Update

U.S. Dollar Rallies, Hits Multi-Month Highs; GDP Delivers

April 27, 2018

The U.S. Dollar is rallying this morning as a result of better-than-expected Gross Domestic Product figures revealing a 2.3% growth for the first quarter of 2018.

USD

The estimate of 2.0% was beaten while it is also understood that 2017 ended at a faster pace of expansion at 2.9% for Q4. Nevertheless, our numbers look stellar off the bat with GDP up in comparison to the United Kingdom, where the expected 0.3% was not met and instead it registered at an awful 0.1%.

Additionally, Personal consumption and Core Personal Consumption Expenditures (PCE) met their forecast in the U.S. Economic performance divergence is driving the buck much higher against the Euro and Pound. Private-sector wages and salaries had their biggest climb since the third quarter of 2008, when the financial crisis started.

In regards to overall optimism, the dollar’s rise is also correlating with positive developments geopolitically as reports came in this morning of a deal between South and North Korea to sign a peace treaty to their 60+-year war.

 

EUR

The Euro is trading at its weakest point since January 10th as it sank during the time of writing because of the boost to the dollar caused by solid economic indicators. Furthermore, reaction to yesterday’s European Central Bank meeting commentary was Euro-negative as President Mario Draghi admitted that the economic pace had started to slow down and there were no plans for rate hikes outlined. It seems like the perception of monetary tightening that was expected to keep the Euro surging has started to fade in a dramatic way.

 

GBP

The Pound fell by almost 1.5% after the release of a devastating GDP level of growth that registered at just 0.1% for the first quarter of 2018. Expectations were already quite low at 0.3%, while the annual average also fell to 1.2% under 1.4% predicted. This represents the slowest pace of economic expansion in four years. We do not expect the Bank of England to hike its benchmark interest rate when they meet on May 10th.

Sterling had shown too much resilience because fundamental data had not been hurt, but these indicators are manifesting the fears over a messy Brexit negotiation, uncertainty over trade in the future, and the potential of many jobs departing. We foresaw these troubles and the currency’s paying a heavy toll, finally. Lowest Sterling since start of February.

 

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