May 01, 2025

“US growth turned negative in the first quarter as a huge pickup in imports skewed the overall figure. That was expected, and the dollar is on a positive run as the mood is picking up slightly.”

Tim Hallinan – Trading Director

USD

The dollar is trading at a two-week high this morning, despite yesterday’s data showing the US economy contracting for the first time in three years. The figure was slightly below expectations at an annualised -0.3%, but as expected it was a huge negative contribution from tariff frontrunning imports (-4.8%) that dragged the number down. The underlying numbers were relatively solid for now, with final sales to domestic purchasers falling only from 3.0% to 2.3%. Nevertheless, the Trump administration struggled to find a coherent excused for the overall contraction, with the president himself blaming Biden and saying it had nothing to do with tariffs, whilst also attributing the jump in investment to his policies. A couple of other developments helped sentiment – things are looking more positive for trade talks with China and with the EU, and Ukraine signed a minerals agreement with the US as Trump has shifted support away from Putin and toward Zelenskyy in recent weeks. That has all been positive for the dollar.

The yen is the biggest loser today after the BoJ held rates steady and slashed its forecasts for growth and inflation. The focus today will be on jobless claims and the ISM manufacturing PMI this afternoon, which is expected to be quite poor at 47.9.

GBP

Sterling has fallen around 1% against the dollar over the last couple of days and is now flat on the week. There is some data on mortgage approvals, money supply and consumer lending this morning, plus some local council elections to take the political temperature. Again, though, it is the US data in charge right now.

EUR

The euro has made a couple of attempts to push below 1.13 this morning thanks to an improving dollar. GDP yesterday was better than expects at 0.4% growth, although markets are not too worried about the last quarter and are more concerned about the impact of Trump’s tariffs in the coming months. French and German CPI inflation figures were both slightly hotter than consensus yesterday, and tomorrow’s eurozone-wide print is expected at 2.1%. Holidays across Europe might mean some lower liquidity today, and it will probably be the USD leg driving the euro.

Markets

Although US equities have now unwound the majority of the post-‘liberation day’ losses, Trump’s first 100 days have still been the poorest record for stocks since Nixon’s second term in 1973. The S&P 500 managed to finish marginally higher yesterday despite the soft GDP headline figure, and Europe finished relatively flat.

Main Economic Events (All Times CET)

5:30am: Bank of Japan Decision
10:30am: UK Mortgage Approvals
2:30pm: US Unemployment Claims
4:00pm: US ISM Manufacturing PMI

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