Third quarter GDP beats estimates giving lift to dollar
Peter Compton " | October 30, 2019
Better than expected Q3 GDP data helped the dollar stem three days of losses.
Financial markets await this afternoon’s Federal Reserve announcement on interest rates - most economists expect a 25 bp rate cut. The Fed’s comments on expectations for rates will be scrutinized as some of the factors leading to this summer’s two rate cuts have since dissipated.
October 30, 2019
EUR/USD 1.1112 GBP/USD 1.2881 USD/CAD 1.3085 AUD/USD 0.6862 USD/JPY 108.88 USD/CNH 7.0565 USD/ILS 3.5266 USD/MXN 19.1486 USD/CHF 0.9921 USD/INR 70.8950
Third-quarter GDP came in at 1.9%, ahead of the 1.6% expected, but down from Q2’s 2%. The dollar rallied from overnight lows.
The Federal Reserve will take the spotlight at 2pm Eastern time and is expected to deliver its third consecutive interest rate cut. The Fed’s approach to the future path of monetary policy will be watched carefully with some economists arguing there is little reason for additional cuts. The dollar would benefit should the Fed signal they are done cutting rates.GBP
The pound rallied on news the UK Parliament agreed to the Prime Minister’s motion for a snap general election on December 12. Most will consider the election to be a proxy referendum on Brexit. More important for the value of the pound, the financial markets see little chance of the UK crashing out of the European Union without some kind of pre-negotiated trade agreement in place.EURFrench GDP and German inflation data came in more or less in-line providing some support to the euro. Also helping the common currency are comments by incoming president of the European Central Bank, Christine Lagarde. She reiterated her predecessor’s plea for countries like Germany and the Netherlands, with strong fiscal budgets, to increase spending to help keep the eurozone from falling into a broad recession.CAD
The Canadian dollar is flat in early trading as FX markets await the US Fed meeting as well as the Bank of Canada meeting and announcement this afternoon. Should the Canadian central bank sound more dovish in its comments then the loonie will weaken – especially if the Fed signals rate cuts are done for now.ASIA/PACIFIC
The Japanese yen lost ground to the dollar after the US GDP data came in better than expected. Trading was very light in Asian currencies overnight as the markets await this afternoon’s Fed announcement.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory