The EUR/USD saw some jitters on Thursday and is near 1.0730 in the early session on Friday, following a mixed session and challenging data from the US that dampened hopes of a rate cut.
US gross domestic product (GDP) fell more than expected on Thursday, with first quarter annualized growth slowing to 1.6% from the previous reading of 3.4% and well below the 2.5% forecast. Weakening growth is a boon for investors hoping for an acceleration in the pace of rate cuts by the Federal Reserve (Fed), but too rapid a pace could cause negative consequences for the entire U.S. economy.
Hopes for a rate cut were dashed after US personal consumption expenditure (PCE) inflation accelerated again in the first quarter, with PCE rising 3.4% in the first quarter, up from 1.7% in the previous quarter. Still high inflation is dampening the market’s hopes for a rate cut, which led to a drop in risk appetite during the US trading session, after which markets began a strong but limited recovery.
Friday sees the release of mostly insignificant European data, and markets will turn to US PCE price index data for March as investors want a more accurate view on the outlook for US inflation. The US PCE price index for March is expected to be unchanged at 0.3%, while the annual rate is expected to fall slightly to 2.6% from 2.8%.
Trading recommendation: Trade predominantly on Buy from the current price level.
Origin: FreshForex
