US Dollar Index pierces 98.00 on mixed US GDP

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  • The index comes under pressure and tests sub-98.00 levels.
  • Flash US Q1 GDP came in above estimates at 3.2%.
  • Final April U-Mich index coming up next.

The US Dollar Index (DXY), which tracks the greenback vs. a basket of its main rivals, has turned negative for the day and remains hovering over the key 98.00 handle.

US Dollar Index offered post-data

The index came under selling pressure after advanced US GDP figures for the first quarter surprised markets to the upside today, although the price deflator missed consensus.

In fact, the US economy is now seen expanding at an annualized 3.2% during the first three months of the year, beating prior estimates and up from Q4’s 2.2% growth.

However, the GDP Price Index is expected to expand at a meagre 0.6%, below consensus and reversing the previous 1.9% gain.

Additional US data for Q1 saw Real Consumer Spending expanding 1.2%, flash PCE Prices rising 0.6% and Core PCE Prices gaining 1.3%, both prints lower than previous 1.5% and 1.8%.

In spite of the ongoing correction lower, the greenback remains on track to close the second consecutive week in the positive territory, this time including fresh YTD highs in the 98.30/35 band, area last traded in May 2017.

What to look for around USD

The upbeat momentum in the buck appears sustained by solid prints in the domestic docket as of late in combination with weakness from overseas data, mostly from Euroland, while hopes of a US-China trade deal appears now re-ignited in light of the upcoming meeting between both parties in Beijing. Despite today’s GDP and prices data releases came in on a mixed note, they nonetheless contribute to mitigate prospects of rate cuts in the near/medium term. The last FOMC minutes reinforced the neutral stance of the Fed for the next months, although a rate raise has not been ruled out just yet. On the greenback’s positive side we find solid US fundamentals, its safe haven appeal, favourable yield spreads vs. its peers and the status of global reserve currency. This, plus the Fed’s current neutral/bullish prospects of monetary policy vs. the dovish shift seen in its G10 peers is expected to keep occasional dips in the buck shallow for the time being.

US Dollar Index relevant levels

At the moment, the pair is receding 0.12% at 98.04 and a breach of 97.26 (low Apr.22) would aim for 96.92 (55-day SMA) and finally 96.75 (low Apr.12). On the upside, the next resistance emerges at 98.32 (2019 high Apr.25) seconded by 99.89 (high May 11 2017) and then 100.51 (78.6% Fibo of the 2017-2018 drop).

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