Home Daily Commentaries US economy slows in Q1 2023

US economy slows in Q1 2023

Daily Currency Update

GBP/USD continues to trade just under the 1.25 handle as it has most of this week with economic data thin on the ground. A report in the Financial Times this morning has revealed that the government is set to abandon its plan to scrap all EU-era law by the end of 2023. With nearly 4000 pieces of legislation set to expire on 31st Dec the govt has decided to work through updating/amending them over a longer period. The decision has been welcomed by many business groups as it removes a lot of uncertainty hanging over certain sectors. With the UK agreeing the Windsor Framework deal with the EU re: the Irish border it seems that progress has been made in the past few months re: ongoing issues since Brexit however obviously this has not been well received by some hard-line Brexiteers in the Conservative party. This seems to have added a little support to the pound this morning offsetting some broad dollar strength that is being seen in the markets. GBP/USD is currently around 1.2480 with GBP/EUR pushing higher to 1.1345.

Key Movers

Yesterday saw US growth for January-March slow to an annualised pace of 1.1% down from Q4 2022's 2.6% y/y. Interestingly the dollar gained on the release as it appears that markets may have been more focused on the component within the publication that focused on inflation. This showed that prices rose faster than expected in Q1 2023 pushing up 4% compared to the quarter before. Also, Unemployment claims were a touch lower than estimates, so all this resulted in a net-gain for the greenback pushing EUR/USD back down to the 1.10 level. Adding some extra downward pressure to the euro this morning is some mixed growth data from the bloc. French GDP for Q1 came in as forecast at 0.2%, Italy and Spain both exceeded showing 0.5% however the EZ's powerhouse Germany came in flat narrowly missing a technical recession after it shrunk 0.4% the quarter before. EUR/USD is back under 1.10 as a result. Later today we have US Personal Consumption Expenditure figures at lunchtime with the overall reading predicted to slow to 4.6% y/y with the core component, which strips out food and fuel costs expected to edge lower to 4.5% y/y. After much of Europe has enjoyed a long weekend next week sees a slew of high impact economic news including interest rate decisions from The Reserve Bank of Australia (Tues), The US Federal Reserve (Wed) and the European Central Bank (Thurs). Rounding off the week we have the monthly jobs report from the States so expected a lot of volatility as we enter May.

Expected Ranges

  • GBP/USD: 1.2400 - 1.2545 ▲
  • GBP/EUR: 1.1245 - 1.1380 ▲
  • GBP/AUD: 1.8840 - 1.9000 ▲
  • EUR/USD: 1.0910 - 1.1090 ▼