Fundamental data for the US was a bit of mixed bag yesterday. We kicked off with the quarterly GDP number. Economic growth slowed in the final quarter of the year with GDP posting 2.2 percent, missing the forecast and down from the previous quarter. This does leave full-year growth at 2.9 percent putting 2018 as the best year since 2015 and well above the 2.2 percent increase seen in 2017. However, given the recent slowdown in global economies, pressure now mounts for first quarter GDP. Slow growth is expected, and some are even looking for the first signs of a recession. Our estimate is for first quarter GDP to be below 2 percent.
The Dollar found some support after the downward revision of GDP through the unemployment claim numbers. The data highlighted claims fell to their lowest level in two months, posting 211K where 222k was expected. Three members of the Federal Reserve board all spoke yesterday. They all sounded cautiously optimistic about the outlook. St. Louis Fed President James Bullard said “it's premature to consider a rate cut.” He added that he expects growth to pick up in the second quarter.
China trade talk was optimistic. President Donald Trump’s tweeted that "doing well in trade talks with China." In the past, these comments have sparked a flurry, but markets seem to become immune to these now. US Treasury Secretary Steve Mnuchin and US Trade Representative Robert Lighthizer had a ‘productive’ dinner with the Chinese delegation ahead of a full day of talks today between the two sides. Meanwhile, Larry Kudlow, Trump's economic advisor, tempered expectations, saying the US is willing to extend the process for weeks or months to get the right deal for the US.