US Dollar Falls After Slower Economic Growth Data
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What’s going on here?
The US dollar dropped on May 30, 2024, after revised data indicated the US economy grew slower than expected in the first quarter. The Commerce Department revised GDP growth to a 1.3% annualized rate, down from the earlier estimate of 1.6% due to reduced
consumer
spending.
What does this mean?
The slower economic growth has eased bets on Federal Reserve (Fed)
interest
rate hikes. An FX trader at Monex USA stated that figures coming in below expectations reduce pressure on the Fed to raise rates. Meanwhile, Charu Chanana from Saxo Bank highlighted traders’ nervousness about the yen nearing the 158 level, potentially prompting Japanese intervention. Earlier this week, a jump in long-term Treasury yields to 4.6% had temporarily pushed the dollar higher, making US debt more attractive.
Why should I care?
For markets: Navigating the waters of uncertainty.
The US Dollar Index rose to 105.18 but fell to 104.78 after the GDP revision. The dollar dropped 0.57% against the Japanese yen to 156.755 after hitting a one-month high. The euro climbed 0.29% to $1.083, while sterling rose 0.18% to $1.2724. Traders are now focusing on the release of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred
inflation
measure, and upcoming euro zone price data.
The bigger picture: Global economic shifts on the horizon.
The revised GDP figures not only impact the US dollar but also reflect broader economic conditions affecting global markets. Germany’s stronger-than-expected April inflation reading signals potential
volatility
for euro zone price data. Additionally, bitcoin showed a growth of 1.88% to $27,673, indicating investor interest in alternative assets amid currency fluctuations.
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