On the foreign exchange market, the dollar index stalled on Friday, adding 0.17% to $98.04 after a gain of 1.2 % in two weeks. The euro offered a technical rebound of 0.19% to $1.1151, but remained close to its lowest level since 2017 against the greenback.
In the US bond markets, the yield on the benchmark 10-year T-Bond bond dropped 3 basis points to 2.50% on Friday. Despite growth higher than expectations in the first quarter in the United States, investors expect the continuation of an accommodative monetary policy from the Federal Reserve.
Strong surprise rise in GDP in the United States in the first quarter
GDP grew by 3.2% in the first quarter annual rate, a figure well above all expectations of economists, who expected growth of 2%, after +2.2% in the fourth quarter of 2018. However, by closely examining the underlying demand, it appears that household consumption was lower than expected, as was inflation.
Consumer spending (which accounts for more than two-thirds of GDP) increased only 1.2% from January to March, compared with 2.5% in the fourth quarter. The phenomenon may be related in part to the tax administration’s “shutdown” in January, which delayed refund checks for overpayment of income tax as part of the withholding tax. In addition, this year, certain deductions benefiting well-off households have also been planned.
It appears that the sharp rise in GDP results in part from technical and temporary factors, such as the reduction of the trade deficit or the accumulation of business inventories. Businesses imported heavily in 2018, before the introduction of taxes on certain products, especially Chinese, which disrupted statistics.
Meanwhile, the final index of US consumer sentiment at the University of Michigan, released Friday stood at 97.2 in April, a little higher than expected (97.1) and after 97 in March. The index of expectations strengthened to 87.4 at the end of the month, but remains down compared to March, while that of the current conditions stood at 112.3, also down compared to last month.
On the front of trade negotiations, speculation resumed on the date of conclusion of an agreement between the United States and China, which will be greeted by a summit between Donald Trump and his Chinese counterpart Xi Jiping.