Dollar Gains on GDP; Fed Meeting on Deck

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Dollar Gains on GDP; Fed Meeting on Deck

OCTOBER 30, 2019

The U.S. dollar dipped a bit overnight but is on the offensive in early trading following better-than-expected economic data. The first look at third-quarter GDP showed that the economy grew at a 1.9% annualized pace, beating expectations of a slowdown to 1.6% growth.

Overview

The expansion was sustained by better-than-expected personal consumption which came in at 2.9%, beating estimates of 2.6%.  The GDP data will tap down concerns over a prolonged slowdown, but it is worth noting that both prints were worse than the second quarter reading.  The second-quarter annualized GDP registered at 2.0% and personal consumption was 4.6%.

A separate report showed an uptick in private hiring.  ADP reported companies added 125K jobs in October, higher than the estimated 110K.  However, September’s number was downwardly revised considerably making the overall report negative.

After we absorb this morning’s data, we will shift attention to this afternoon’s Federal Reserve meeting.  It is widely expected that the central bank will cut rates by a quarter of a point.  The cut will get the headlines, but it will be the statement that will cause volatility.  We expect the central bank to make slight hawkish changes to the states despite a slew of disappointing data (except for this morning.) That could allow the greenback to strengthen slightly, if at all.

What to Watch Today…

  • Federal Reserve at 2 p.m.

A complete Economic Calendar can be found here.

EUR

The Euro ticked higher overnight, finding support from a report that showed that the French economy grew more than forecast last quarter.  However, a separate report showed more cracks in Germany’s labor market, adding to the long list of warning signs for the bloc’s largest economy.  The common currency’s gains were short-lived versus its American counterpart as the U.S. dollar is enjoying widespread gains following U.S. GDP numbers.

CAD

The Federal Reserve will have some company today as the Bank of Canada will also announce its interest rate decision at 10 a.m. Eastern.  Expect the BoC to keep rates on hold, minimizing the interest rate differential and keeping the loonie strong versus the U.S. dollar.  As we mentioned yesterday, this is already priced into the current USD/CAD levels near a three-month loonie best.

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