The key publication for today from the macroeconomic calendar was the publication of economic growth in the United States in the first quarter of this year. Looking at the market reaction, the GDP data alone were the least important.
In the first quarter of 2019, the US economy expanded by 3.2 percent in annual terms, easily beating market expectations at 2 percent. The increase was mainly supported by expenditure on consumption, investments, inventories, net exports or state spending, which increased by 3.9 percent, the highest since the first quarter of 2016. Nevertheless, expenditures on private consumption, which increased by 1.2 percent, decreased the dynamics observed in the previous period from 2.5%. In turn, in the data on net exports, it is worth noting that part of its growth fueled a significant decline in imports by 3.7 percent, which is the largest decrease since the fourth quarter of 2012.
Despite the generally positive report for the economy, price publications were very disappointed. The indicator showing the average increase in the prices of domestic consumer goods excluding food and energy prices (PCE core) increased only by 1.3 percent, which is the lowest reading since December 2017. In turn, the PCE prices index increased by only 0.6 percent, the least since June 2017.
Lack of price increase may result in no interest rate increases. Without inflation The Federal Reserve of the United States has no reason to further tighten monetary policy, hence the reaction of the US currency may also follow. It seems that traders can take profits from long positions in the USD.
Chart: EUR/USD, H1. Conotoxia trading platform.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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