Dollar gains despite misses in US GDP and consumer sentiment data
Most major currency pairs were directionless during the European Session in the absence of key data releases out of Europe, while traders were re-positioning ahead of the long weekend in the UK and US. Markets in London and New York will both be closed on Monday due to a public holiday.
The US dollar was firmer today and gained momentum despite misses on some key US data but US economic growth was revised upward and this helped support the greenback.
A second estimate of US GDP data indicated signs of stronger growth during the first quarter in the US economy, as the slowdown was less pronounced than initially thought.
Q1 GDP was revised up from a preliminary 0.5% reading, to show a 0.8% annual pace. While the recent data missed expectations for a reading of 0.9% growth, the higher revision shows that activity is bouncing back more solidly in the US economy.
The University of Michigan consumer sentiment index also missed estimates and climbed less than forecast in May. The final reading rose to 94.7 versus expectations for a 95.4 reading and was lower than the previous estimate of 95.8. However the bright spot in the data was that the May final reading was higher than April’s 89.0 reading.
Consumer spending makes up the biggest part of the US economy and contributes to economic growth.
The dollar dipped against the yen after the GDP data, falling to 109.46 yen but quickly rebounded to a session high of 109.88 yen. The euro fell sharply against the dollar to reach 1.1124 after having tested 1.12 at the start of European trading. The pound also eased against the dollar to 1.4612 from a session high of 1.4687. Sterling is still on track to end the week higher though, after being given a lift this week by some polls indicating those in favor of the US remaining in the EU are in the lead versus those preferring a Brexit.
Markets will shift their focus to a speech by Fed Chair Janet Yellen later today. Investors will look for any clues that the Fed will raise interest rates soon. Recently, several Fed officials have indicated that a rate hike may be near.
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