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US dollar inches off two-month lows after upbeat GDP numbers

USD - United States Dollar

The US dollar inched off three-month lows today after first-quarter GDP for the year increased at a 6.4% rate, just below the market forecast of 6.5%. This signals the US economy is rebounding faster than global counterparts, with the vaccination program and two previous rounds of Covid-19 stimulus relief proving to boost consumption and domestic demand.

Yesterday, the US dollar index fell to 90.55 – the lowest level in almost 5 weeks after comments from the Federal Reserve meeting. Chairman Jerome Powell acknowledged an uptick in economic activity, but also noted inflation pressures could rise in the coming months. As expected, The Fed left interest rates unchanged and close to zero.

Key Movers

The market is becoming more and more comfortable with the idea that the UK is set to rebound out of this pandemic in a healthy fashion, and with it, the pound has benefitted. Retesting of key psychological levels of 1.40 on GBPUSD and 1.16 on GBPEUR remain a real possibility in the coming days. A stronger GBP depends on action with the euro and USD.

The Australian dollar maintained a narrow trading band through trade on Wednesday despite key event risks crowding the macroeconomic docket. The AUD slipped toward intraday day lows at 0.7730 through the domestic session following a softer than anticipated Q1 inflation print. CPI data showed a surprise softening in price pressures through the three months prior to March 31 prompting investors to roll back any expectation the RBA may be forced to adjust interest rates ahead of schedule in a bid to rein in rising inflation.

Expected Ranges

EUR/USD: 1.207 - 1.214 ▼

GBP/USD: 1.389 - 1.397 ▲

AUD/USD: 0.775 - 0.781 ▲

USD/CAD: 1.228 - 1.238 ▼