US GDP Growth Disappointed The Analysts

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EURUSD, Daily

I wrote this morning saying that this is the fourth time the market moves this high and towards the 1.1035 resistance after creating a higher low on April 13^th. This lowers the probabilities of price reacting lower from the same resistance level. Therefore we should be careful and not take it granted that the market will turn lower from the same levels again. It could rally higher before reacting lower again. Weaker than expected US GDP figure supported the pair and it is at the time of writing trading at 1.1057. Disappointment in GDP growth further underlines the validity of dovish expectations on the Fed’s future policy.

US GDP growth slowed to a disappointing 0.2% rate in Q1, much weaker than expected, after sliding to a 2.2% clip in Q4, from 5.0% in Q3. Consumption spending was up 1.9% versus 4.4% previously. Fixed investment declined 2.5% after Q4?s 4.5% rise, versus Q3?s 7.7% rate, with non-residential spending falling 3.4% after a 4.7% Q3 gain, thanks to a 23.1% plunge in structures; residential spending rose 1.3% from 3.8%. Government consumption remained soft, falling 0.8% from -1.9%, with state and local spending down 1.5%. Inventories contributed 30.3$ bln (0.74%) after subtracting $2.2 bln in Q3 with a hefty $110.3 bln accumulation rate. Net exports subtracted $50.7 bln (-1.25%) from -$40.0 bln in Q4, and after adding $29.0 bln in Q3. The chain price index slid 0.1% after edging up 0.1% in the prior quarter, with the core rate up 0.9% from the 1.1% pace recorded previously.

Janne Muta

Chief Market Analyst

HotForex

Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.

US GDP Growth Disappointed The Analysts