GDP Rises But Misses Estimates
The latest US economic data released yesterday came in as a slight disappointment to USD bulls. 1st quarter GDP was seen printing 6.4%, mildly undershooting the 6.8% the market was looking for. While still a firm improvement on the 4.3% recorded in Q4 2020, showing that the economy is rebounding firmly, bulls were disappointed not to see a stronger print. Overall, however, there were a lot of positives in the data.
Consumer Spending Surged
Looking at the breakdown of the data, consumer spending was seen rising by 10.7% over the quarter, a firm jump on the 2.3% rise seen a quarter before. Spending on goods was the star in this category, rising by 23.6%. Durable goods in particular (appliances and long-lasting goods) were seen higher by over 40%. Spending on services was also seen increasing, albeit by a much lower 4.6%. Services spending has been the main laggard over recent months, so signs that spending in this category is starting to increase is particularly noteworthy.
Stimulus Impact Noted
The main driver behind the jump in spending over the quarter was the double injection of stimulus with $600 cheques in January and $1400 cheques in March. However, spending over the quarter wasn’t necessarily as high as many were predicting with the household savings rates surging from 13% in Q4 2020 to %21.
Imports Rose Again in Q1
Elsewhere, the data showed that imports were higher again by 5.7% over the quarter while exports dropped by 1.1%, one of the weaker areas of the report. Government spending and investment rose by 6.3%, including a 14% jump in federal spending and an almost 2% increase for state and local entities.
Finally, inventories were also seen dropping heavily over the quarter which likely accounted for the GDP miss. This was mostly down to the increased spending underway in the US when compared with its key trading partners. However, the near-term negative impact is likely to result in longer term gains leading to a faster recovery over the second half of the year.
Weekly Jobless Claims Miss Targets
The weekly jobless claims hit a fresh pandemic low at 553k. however, this was slightly above the 545k the market was looking for while the trailing indicator, continuing claims, was seen rising 50 3.67 million. In all, the data largely confirmed what the Fed was saying on Wednesday: that the recovery is underway, and the outlook is improving but there is still a way to go.
Technical Views
USDCAD
The sell-off in USDCAD has seen price trading down to test the bottom of the bear channel, just ahead of the 2018 lows at 1.2243. there is scope for a bounce here though, while price holds below 1.2368 level, the channel has room to continue further down to the next bear target of the 2017 lows at 1.2068.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.