The Dollar is ending the week on a slightly softer note despite the release of much stronger-than-expected US GDP data for Q1. The GBP/USD cross has inched back above 1.29 while AUD/USD has edged back to 0.705.
The first reading revealed that US GDP growth accelerated to 3.2% qoq annualised – versus a consensus forecast of 2.0% – from 2.3% in Q4 2019. However, the pick-up in headline growth was mainly due to a more rapid build-up of inventories and a decline in imports – trends which may well be reversed in subsequent quarters.
Moreover, markets will have taken notice of the fact that core PCE inflation – one of the Federal Reserves’ favoured measures of price pressures – fell to just 1.3% yoy in Q1 from 1.8% yoy in Q4 2018. Taken together, today’s data suggest that the Fed is still unlikely to be in any rush to even think about hiking its policy rate and this has seemingly weighed on a Dollar which is still up about 0.8% on the week.
