• The United States Gross Domestic Product is seen expanding at an annualized rate of 2.5% in Q1.
  • The current resilience of the US economy bolsters the case for a soft landing. 
  • Markets now see the US Federal Reserve starting its easing cycle in September.

The U.S. Bureau of Economic Analysis (BEA) is set to release the initial estimate of the U.S. Gross Domestic Product (GDP) for the first quarter of 2024 on Thursday at 12:30 GMT. Analysts project a 2.5% expansion rate for the January-March period, which, although solid, is a slowdown from the 3.4% growth seen in the previous quarter.

Preview of U.S. GDP Release: What to Expect

This Thursday marks a significant moment as the U.S. unveils its first-quarter GDP figures. The estimate is anticipated to reflect a 2.5% growth, demonstrating a robust yet slower pace compared to the 3.4% increase in the prior quarter.

According to the latest BEA release, the U.S. economy grew by 2.5% in 2023, fueled by increases in consumer spending, nonresidential fixed investment, government spending, and exports. These gains were partially offset by reductions in residential investment and private inventory investments, with imports also declining.

Attention will also be directed towards the GDP Price Index, which measures inflation within the economy. After rising 1.7% in the last quarter of 2023, the index is expected to have increased by 3.0%.

Economic Indicators and Market Implications

The GDP data release coincides with expectations of the first interest rate cut by the Federal Reserve in September, as reflected by a 70% probability indicated by the CME Group’s FedWatch Tool. This is a significant increase from the nearly 3% chance seen a month ago.

Federal Reserve officials, including Atlanta Fed President Raphael Bostic and New York Fed President John Williams, have provided insights into the inflation outlook and monetary policy decisions. Their comments suggest a cautious approach to rate cuts, with Fed Chairman Jerome Powell indicating no rush to begin reducing rates.

Market Reactions and Future Outlook

A stronger-than-expected GDP reading for the first quarter could push back the timing of the Fed’s anticipated easing cycle, possibly extending to September or later, which would likely strengthen the U.S. Dollar. Conversely, a GDP figure significantly below expectations could prompt a reevaluation of the potential for rate cuts later this year.

Technical Perspectives on the U.S. Dollar Index (DXY)

From a technical standpoint, if bullish sentiment prevails, the U.S. Dollar Index (DXY) might challenge its 2024 high of 106.51, reached on April 16. Breaking above this could lead to further gains towards the peak of 107.11 from November last year. On the downside, the April low of 103.88 remains a critical support level, bolstered by the 200-day Simple Moving Average at 103.99. A breach below this could lead to further declines towards the 100-day SMA at 103.67 and the March low of 102.35.

This overview provides a comprehensive look at the upcoming GDP data, its implications for monetary policy, and potential market reactions.

Related Post