US dollar records mild gains following GDP, jobs data

The US Q1 GDP shows a slower growth rate of 1.6% YoY. Positively, there is a solid weekly trend in jobless claims. The short-term direction of DXY will be determined by Friday’s PCE data for March.

After its lengthy surge in April, the US Dollar Index (DXY) is seen trading slightly down at 105.75 on Thursday and finding it difficult to gain any ground. The Q1 GDP data caused the Index to decline, but losses might be contained after the European session saw the release of positive labour market data.

The US economy is still strong, but increased interest rates and inflation will likely cause it to grow more slowly. The Federal Reserve (Fed) is sticking to its guns and doesn’t appear to be in a rush to begin easing, and hawkish moves in the market support the USD. The expectations of those investors are expected to be impacted by the March Personal Consumption Expenditures (PCE) statistics.

According to the Bureau of Economic Analysis’s preliminary estimate, the US Gross Domestic Product (GDP) increased 1.6% YoY from January to March. GDP data lagged behind Q4 2023’s 3.4% YoY growth, falling short of market estimates of a 2.5% yearly increase.

Initial Jobless Claims decreased by 5K for the week ending April 20, according to data from the US Department of Labour, bringing the total to 207K. The weekly decrease in initial claims for unemployment benefits outpaced market estimates, which were for 214K claims; this was a significant improvement over the 212K claims for the previous week.

Markets placed bets on 20% chances of a rate drop in June in relation to Fed predictions. There is also considerable trust in the US economy’s continued performance, which supports delaying the easing cycle. This suggests that a probable Fed rate decrease in July or even September isn’t entirely assumed.

Technically, despite overall bullishness, DXY enters a neutral gear and bears are present. The daily chart’s indicators show that the DXY is in a mixed position. The Relative Strength Index’s (RSI) positive flat state corresponds with sluggish buying activity. Additionally, the Moving Average Convergence Divergence (MACD)’s declining green bars indicate a waning bullish attitude and possible weakening in the near future.