EUR/USD Finding Solid Buying Interest as US GDP Numbers Revised Lower
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Data out of the United States on Thursday, June 28 revealed a surprise downgrade to first-quarter GDP from 2.2% to 2.0%.
Meanwhile, initial jobless claims numbers also disappointed with a reading of 227K against expectations for a 220K to be delivered.
On the back of the data we can see the Euro is trading higher against the Dollar, but we do also note that much of the gains coincide with strong support levels on the charts around current levels.
Nevertheless, "Dollar investors were given a surprise this afternoon by the latest quarterly GDP figures for the US, after the print missed expectations and registered 2.5-year lows," says Anthony Kurukgy, Senior Sales Trader at Foenix Partners.
Kurukgy says President Trump’s $1.5 Trillion income tax cut package, which was meant to spur faster economic growth, has seemingly hit a bump in his 3% growth target for this year.
If “America First” policies continue to heighten trade war fears in the short- to medium-term, "US economic prospects for the remainder of 2018 may need to be readjusted," says Kurukgy.
Looking at the details of the GDP report, consumption, net foreign trade and inventories were all revised down slightly, but business capex and government spending were moved up.
"In any event, Q1 is now ancient history, and Q2 GDP growth is headed for 4%-plus," says Ian Shepherdson, Chief Economist with Pantheon Macroeconomics.
As such, we would not expect any lasting impact to the Dollar caused by the data.
Regarding the jobless claims numbers, the reading of 227K represents the highest level in five weeks but the increase is Shepherdson points out the number is well within the usual range of variation and it's very unlikely to mark the start of a sustained increase.
"The trend in claims has dropped to about 220K from 240K or so at the start of this year, while indicators of labor demand remain extremely strong," says Shepherdson.
While not detrimental to the Dollar's overall prospects, the data does nevertheless help the Euro-Dollar exchange rate continue to find a bid with 1.1569 being quoted at the time of writing with the current week's low residing down at 1.1528.
Analyst Shaun Osborne at Scotiabank holds a neutral to bullish stance on the pair, observing technical levels in the 1.15s represent good support for the Euro against the Dollar.
"Our bullish assessment hinges on support at 1.1500/10, where the EUR has bounce from three time now since late May, holding up. Recall last week’s reversal formed a bullish key reversal day, suggesting that the recent weak phase in the EUR had ended. Gains through 1.1720 are needed to solidify better technical prospects," says Osborne.
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