U.S. GDP growth in the first quarter was weaker than expected. The U.S. dollar index fell on the 25th

The U.S. dollar index (105.6013, 0.0289, 0.03%), which measures the U.S. dollar against six major currencies, fell 0.24% on the day and closed at 105.598 in late foreign exchange trading.

Preliminary data released by the U.S. Department of Commerce on the morning of the 25th showed that the U.S. GDP growth rate in the first quarter of 2024 was 1.6% on a quarter-on-quarter basis, significantly lower than market expectations of 2.3% and 3.4% in the fourth quarter of last year. Among them, the annualized growth rate of personal consumption expenditures in the quarter was 2.5%, lower than market expectations of 2.8% and 3.3% in the previous quarter.

The data also showed that core personal consumption expenditure prices rose by 3.7% in the first quarter, exceeding market expectations of 3.4%.

Boris Kovacevic, global market strategist at international payment platform Convera, said the market's reaction to the GDP data showed that investors were basically focused on inflation rather than economic growth. The 3.7% increase in the core personal consumption expenditures price index in the first quarter does indicate that the increase in the personal consumption expenditures price index in March, which will be announced on the 26th, will be even higher.

Data released by the Chicago Mercantile Exchange's FedWatch Tool at 6 pm on the 25th showed that the probability that the Federal Reserve will keep the federal funds rate unchanged at the current level at the September interest rate meeting has significantly increased from 30.2% the previous day. increased to 41.6%. The Federal Reserve is expected to cut interest rates for the first time at its interest rate meeting in early November.

Matt Weller, director of the global research team at the online brokerage group GAIN Capital, said that due to the recent optimism in overall economic data, the Fed's postponement of interest rate cuts has become the baseline scenario until September at the earliest, and even an increase in interest rates has gradually emerged. Therefore, the inflation data to be released this Friday may cause an asymmetric market reaction, that is, the positive impact of higher-than-expected inflation data on the US dollar may be greater than the negative impact of weaker-than-expected data on the US dollar.

Weller said the divergence in interest rate expectations between the Federal Reserve and other developed world central banks has been the biggest narrative for currency traders this year, and the latest U.S. core personal consumption expenditures report will be the key to determining whether the trend continues into the second quarter. test.

Weller also said that the rise in the U.S. dollar against the yen (155.64, 0.0600, 0.04%) exchange rate to a multi-decade high has triggered concerns that the Bank of Japan may intervene in the foreign exchange market to push the yen higher. But nothing has been heard beyond platitudes from Japanese policymakers. From a technical point of view, if the Japanese authorities do not intervene, the continued strength of the USD/JPY exchange rate above 155.00 may open up room for continued bullishness to 156.00 or higher, which is not impossible at 160; on the contrary, direct intervention is required. A BOJ meeting or surprising US inflation data could limit USD/JPY gains this week.