US Q1 GDP GROWTH REVISED UP TO 0.8%

2016-05-27_16-12-04

EURUSD, H1     

US Q1 GDP growth was revised up to 0.8%. This rise was from 0.5% but undershot our estimates thanks to the lack of an expected boost in consumption and a big downward bump in intellectual property investment, alongside a slightly smaller than expected $8.7 bln inventory boost. We saw the expected moderate hike in construction and a slight trimming in equipment spending, alongside a surprising $5.6 bln net export boost, leaving a small hike in final sales growth to 1.0% from 0.9%. We’ll keep our Q2 GDP growth estimate at 2.0% until we can review Monday’s income report. The Q1 GDP data still depict an economy suffering from weak global growth, a surging dollar, and falling oil prices that are disrupting the export and petro sectors and contributing to the inventory overbuild. We have business fixed investment declines as companies right-size costs to diminished nominal revenue in the face of price weakness and consumption restraint from cautious households. We expect diminishing global, petro, and inventory headwinds in Q2 as GDP growth bounces. EURUSD rallied a little to1.1172 on the release only to fall back to 1.1152, all eyes now on Mrs Yellen and her conversation with Professor Mankiw.

Janne Muta

Chief Market Analyst

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