US Q1 Growth (GDP) Disappoints, US Dollar Nudges Higher Post-Release

US Dollar (DXY) Price, Chart, and Analysis

• The US economy expanded by 1.1% in Q1 compared to expectations of 2%.
• The US dollar pushes higher but remains weak overall.

The US economy expanded by 1.1% in Q1, according to the latest US Bureau of Economic Analysis (BEA) data, missing expectations of 2%. The US economy grew by 2.6% in Q4 2022. According to the BEA, ‘Compared to the fourth quarter, the deceleration in real GDP in the first quarter primarily reflected a downturn in private inventory investment and a slowdown in non-residential fixed investment. These movements were partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in residential fixed investment. Imports turned up.’

The second estimate for US Q1 GDP will be released on May 25th.

Full Q1 GDP Report (BEA)

While growth turned lower, inflation pushed higher with the first look at Core PCE prices rising to 4.9% compared to a forecast of 4.7% and 4.4% in the prior quarter.

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On Friday the latest look at US inflation will hit the screens at 13:30 UK with the release of the Federal Reserve’s preferred measure of US price pressures, Core PCE Price Index (March). Today’s growth and prices data and tomorrow’s closely watched inflation release will go a long way in shaping next week’s FOMC rate decision with the market currently pricing in a 25 basis point hike to 500-525. Current market pricing then predicts that the US central bank will pause raising interest rates before starting a rate-cutting cycle at the end of Q3.

The US dollar pushed higher, aided by the PCE data but remains with a medium-term downtrend. The greenback is finding it difficult to break above the 20-day simple moving average and will likely remain this way until Friday’s data is released.

US Dollar (DXY) Daily Price Chart – April 27, 2023

Chart via TradingView

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