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27.04.202311:34 Forex Analysis & Reviews: US GDP data will determine the Fed's plans

Dollar is sliding rapidly as the release of US Q1 GDP is approaching. Of course, good numbers will be in favor of the currency, as that will support the Fed in their insistence on maintaining an aggressive policy to curb high inflation.

Exchange Rates 27.04.2023 analysis

Not long ago, Chicago Fed President Austan Goolsbee said he is still waiting to see if the recent bankruptcy of two US banks could lead to a greater slowdown in the economy. The recent crisis involving the First Republic Bank confirms this

The bankruptcy of Silicon Valley Bank last month and the subsequent market turmoil have increased the odds that banks will withdraw loans from businesses and consumers, igniting a new credit crisis. But tighter financial conditions may help cool the economy, which is why the Fed is trying to continue raising interest rates.

The upcoming US GDP data for the first quarter of this year will help partially deal with this issue, as no significant drop in growth rates and an increase of 2.0% will convince the Fed to maintain its previous policy and prepare at least a few more rate hikes. But if the data disappoints and is significantly lower than 2.0%, the central bank will be forced to stop the hawkish approach to monetary policy.

The Fed had aggressively raised rates from zero to the current range of 4.75% to 5%, and it is expected to announce another 25 basis points increase at the meeting on May 2-3.

In terms of the forex market, euro is in demand as everyone expects a slowdown in US GDP growth and a more dovish Fed policy. Buyers definitely have a chance to continue a price increase, but the quote has to consolidate above 1.1030 and hit 1.1070 as soon as possible. Only that will trigger a much larger rise to the new resistance level of 1.1100 and towards 1.1130. In the case of a decline around 1.1030, the pair will fall further to 1.0990 and to the next support level of 1.0955.

*Phân tích thị trường được đăng tải ở đây có nghĩa là để gia tăng nhận thức của bạn, nhưng không đưa ra các chỉ dẫn để thực hiện một giao dịch.

Miroslaw Bawulski,
Analytical expert of InstaSpot
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