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  • USD/JPY spikes to 112 following the GDP data from the U.S.
  • US Dollar Index looks to end the week near 98.
  • Wall Street pares early losses, 10-year T-bond yield loses more than 1%.

The USD/JPY pair spiked up to a daily high of 112 in the early NA session with the knee-jerk reaction to strong GDP data but failed to preserve its momentum as the details of the data weighed on the greenback. After easing below the 111.50 mark, however, the pair staged a modest rebound and was last seen trading at 111.61, where it was virtually unchanged on a daily basis.

The U.S. Bureau of Economic Analysis in its first estimate today reported that the economy expanded by 3.2% in the first quarter, which was much higher than the market expectation of 2.1%. However, the fact that temporary factors such as government spending and inventories were behind the strong growth didn’t allow the greenback to capitalize on the upbeat data. The US Dollar Index, which jumped to a fresh multi-month high of 98.33 in the first minute following the data, quickly changed its direction and was last seen moving sideways near 98, losing 0.15% on the day.

Commenting on the data, “There was a sizeable build of inventories ($128 billion at an annualized rate), which added 0.7 percentage points to topline GDP growth. Given the lackluster rate of domestic final spending, some of this inventory build likely was unintentional. Therefore, inventory accumulation should fall back in coming quarters,” Wells Fargo analysts said.

Other data from the U.S. showed that the UoM’s Consumer Confidence Index improved slightly in April’s final reading but was largely ignored by the participants.

Meanwhile, major equity indexes in the U.S. started the day in the negative territory amid mixed earnings figures but pared their early gains with the Dow Jones Industrial Average and the S&P 500 turning positive on the day to make it tough on the safe-haven JPY to preserve its strength.  

In the remainder of the day, the pair is likely to stay in its range below the 112 mark and close the second week in a row with modest losses.

Technical levels to consider