Yesterday, the US GDP data for Q1 was released.
US economic growth slid to an almost two-year low last quarter while inflation jumped to uncomfortable levels, interrupting a run of strong demand and muted price pressures that had fueled optimism for a soft landing.
Gross domestic product increased at a 1.6% annualized rate, below all economists’ forecasts, the government’s initial estimate showed. The economy’s main growth engine — personal spending — grew more slowly than forecast, the Bureau of Economic Analysis report showed Thursday.
In addition, a report showed that a closely watched measure of underlying inflation advanced at a greater-than-expected 3.7% clip, the first quarterly acceleration in a year.
The figures represent a notable loss of momentum at the start of 2024 after the economy wrapped up a surprisingly strong 2023.
Separate data out Thursday showed initial applications for unemployment benefits fell to 207,000 last week, the lowest level in two months.
To sum up, experts say that the US economy may be barrelling towards stagflation, which is the persistence of high inflation amid slowing economic growth. In the situation of stagflation it’s very difficult to forecast the dynamics of financial instruments.
Therefore, it’s better to hope that the stagflationary scenario doesn’t materialize.
Today the indicators that can shed light on the future prospects of inflation in the US — Personal Consumption Expenditure indices — will be published. If the actual value of the core PCE (year-on-year) is below the forecast (2.6%), it could contradict the stagflationary scenario, signal a weakening of the US dollar, and lead to the strengthening of EURUSD.
From a technical point of view, the target of possible EURUSD strengthening could be the level of 1.0850.
The final recommendation is to buy EURUSD if the actual value of the Personal Consumption Expenditures index (year-on-year) is less than 2.6%.
The profit could be fixed at the level of 1.0850. The Stop-loss could be placed at the level of 1.0600.
It’s suggested to limit the trading volume to no more than 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
