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US Dollar Declines for 7th Day on Weak GDP

Highlights: 

  • US dollar index declines for 7th straight day, down 0.3% to 95.80.
  • GBPUSD continues bullish break-out, testing 1.5400.
  • EURUSD climbs to daily high of 1.1075, its best since early-March.

The US dollar plunged for a seventh consecutive day on Wednesday, as weaker than forecast GDP suggested the Federal Reserve would be in no rush to begin raising interest rates.

The dollar index bottomed out at 95.45. It would later settle at 95.80 in the early New York session, down 0.3 percent. The dollar index, which gauges the greenback’s performance against a basket of trade-weighted currencies, has declined for seven consecutive days in what has been a large reversal trend for major dollar pairs.

 

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GBPUSD

Technical Bias: Bullish

Cable continued to push forward on Wednesday, testing the 1.5400 region in the European session. The GBPUSD rose to a fresh two-month high of 1.5414. It would later consolidate at 1.5381, advancing 0.3 percent. A daily close above 1.5398 could lead to a re-test of the February high of 1.5551.

The GBPUSD has advanced more than 5 percent since April 13 when it was trading at 1.4641.

 

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EURUSD

Technical Bias: Bullish

Weak US GDP data have opened the doors to 1.1100 for the EURUSD, which continued to advance on Wednesday. The pair climbed to a session high of 1.1075, its highest since early March. The EURUSD would subsequently consolidate at 1.1043, advancing 0.6 percent. A successful re-test of the 1.1076 resistance would pave the way for 1.1161.

 

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Federal Open Market Committee

The US economy weakened more than forecast in the first quarter, as downturns in exports and a deceleration in consumer spending weighed on economic activity. The US economy expanded just 0.2 percent annually in the first quarter, mirroring last year’s slowdown.

The soft reading, combined with several other disappointing economic data, could give the Federal Reserve the scope it needs to remain on the sidelines for a while longer. A longer period of low interest rates could support a broader pullback for the US dollar, which began soaring last July on expectations the Fed would soon begin normalizing monetary policy. A surging US dollar has hurt quarterly earnings of S&P 500 companies and has weighed on exports.

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