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Forex: US Dollar May Rise Despite a Downgrade of 1Q GDP Data

Forex: US Dollar May Rise Despite a Downgrade of 1Q GDP Data

2014-05-29 06:20:00
Ilya Spivak, Head Strategist, APAC
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Talking Points:

  • New Zealand Dollar Falls as RBNZ Rate Hike Bets Unravel
  • Aussie Dollar Shrugs Off Soft Data, Gains on Risk Appetite
  • US Dollar May Rise Despite Downgrade of 1Q GDP Figure

The US Dollar corrected broadly lower in overnight trade after hitting a two-month high in the preceding 24 hours. The New Zealand Dollar likewise came under pressure in a move that once again tracked a decline in the island nation’s benchmark 10-year bond yield, hinting recent weakness reflects eroding RBNZ interest rate hike expectations. We have entered short NZDUSD.

The Australian Dollar outperformed, shrugging off disappointing first-quarter Private Capital Expenditure data, to rise as much as 0.5 percent on average against its leading counterparts. The move tracked an overnight rally in S&P 500 futures, pointing to a swell in risk appetite as the catalyst behind gains in the sentiment-linked currency. We remain short AUDUSD.

A bare European data docket puts the spotlight turns to the second revision of first-quarter US GDP figure. Expectations point to a downgrade showing output fell 0.5 percent. Initial estimates had the economy growing 0.1 percent.

Speculation about a revised print in negative territory has been swirling around for weeks. This may take the sting out of a soft print, with traders reacting to the outcome in relative rather than absolute terms. That means a better-than-expected outcome may drive the greenback higher even if it telegraphs a significantly weaker first quarter than previously thought.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Retail Trade (YoY) (APR)

-4.4%

-3.3%

11.0%

23:50

JPY

Retail Trade s.a. (MoM) (APR)

-13.7%

-11.7%

6.4%

23:50

JPY

Large Retailers' Sales (APR)

-6.8%

-7.1%

16.1%

1:00

AUD

HIA New Home Sales (MoM) (APR)

2.9%

-

0.2%

1:30

AUD

Private Capital Expenditure (1Q)

-4.2%

-1.9%

-4.5%

European Session

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:30

GBP

Lloyds Business Barometer (MAY)

-

66

Low

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EUR/USD

1.3508

1.3557

1.3574

1.3606

1.3623

1.3655

1.3704

GBP/USD

1.6506

1.6624

1.6667

1.6742

1.6785

1.6860

1.6978

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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