US Q2 GDP Preview: Strong figures could help US Dollar in a “data-dependent” world – by MSalordFX UnitedStates EconomicIndicator SEO DollarIndex
The International Monetary Fund has raised its US GDP growth estimate for 2023 from 1.6% in April to 1.8%, and its global growth estimate from 2.8% to 3.0%. However, the IMF has warned that global growth risks remain tilted to the downside. US growth expectations are higher than most European countries, struggling to avoid a recession. The growth divergence between the US and Europe could limit the decline of the US Dollar or the rally of EUR/USD.
A number in line with expectations, with an annualized growth rate of around 2%, and decreases in inflation indicators – such as the Core PCE Index from 4.9% to 4% or the GDP Price Deflator from 4.1% to 3%– have the potential to weigh on the US Dollar by pushing down US Treasury yields. Such figures would support the scenario of no further rate hikes from theThe worst scenario for the US economy – higher inflation and lower growth – is not necessarily the worst scenario for the US Dollar.
When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
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