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Home » Featured » DXY Weathers GDP Report

DXY Weathers GDP Report

Posted by FXTimes in Featured - May 29th, 2015 10:33 pm GMT

US Dollar USDCHF

Highlights:

  • DXY little changed on Friday, closing at 96.88.
  • US GDP contracts 0.7% annually in the first quarter, as stronger dollar weighs on trade.
  • US stocks decline, with Dow Jones posting triple-digit loss.

The US dollar index (DXY) was little changed on Friday, holding on to weekly gains following a disappointing first quarter GDP revision by the Commerce Department.

The dollar index bounced between a narrow range of 96.75 and 97.19, eventually consolidating at 96.88 at the end of the New York session. The index had opened at 96.87.

 

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The greenback digested losses against the euro and franc, but ended in the green against the yen, pound and Canadian dollar. The DXY ended the week on a gain of 1.8 percent, its second consecutive weekly gain. The index had declined in each of the previous five weeks.

 

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Stronger Dollar Weighs on US GDP

The US economy contracted 0.7 percent annually in the first quarter, as weak international demand widened the trade deficit. American exports decreased 7.6 percent in the first quarter after rising 4.5 percent in the previous. Imports, which subtract from gross domestic product, increased 5.6 percent following a 10.4 percent increase.

A contracting economy is rare during an economic recovery. Quarterly GDP has contracted on three occasions since the recession ended nearly six years ago. Each time, the economy responded strongly in subsequent quarters.

Stocks Tumble

US stocks retreated on Friday, with the Dow Jones Industrial Average posting a triple-digit loss. The Dow Jones fell 115.44 points to 18,010.68.

The large cap S&P 500 fell 13.4 points to 2,107.39, while the tech-heavy Nasdaq tumbled 27.95 points to 5,070.03.

Federal Reserve

The Fed is counting on a second quarter rebound before it begins considering adjusting interest rates. However, not everyone is convinced the economy will come back to life so soon. Unlike last year, where severe weather was responsible for the bulk of the contraction, the factors impacting the latest contraction are multifaceted. Additionally, several bellweather indicators continue to show weakness in the economy. Consumer confidence has also been reserved, suggesting that personal consumption could take a while before it really takes off.

The Fed will issue revised GDP projections at next month’s Federal Open Market Committee policy meetings. With GDP contracting in the first quarter, economic growth is unlikely to surpass 3 percent this year.

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