(31 MAY 2018)DAILY MARKET BRIEF 2:Strong US, weaker USD

(31 MAY 2018)DAILY MARKET BRIEF 2:Strong US, weaker USD

31 May 2018, 14:29
Jiming Huang
0
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While the market focused on Italy, the US released some interesting data yesterday. ADP for May reported a marginally weaker result than expected 178k verse 190k exp. The BEA dropped Q1 real GDP to 2.2% q/q against 2.3% exp from previously reported 2.3% q/q. Personal consumption expenditure (PCE) was reduced 1.0%, confirming 1Q economic weakness. Despite the softer read, we anticipate a healthy recovery in 2Q as consumer fundamentals were solid. As stated by the ADP release the US labor markets, the bedrock for optimism in household, continue to produce. In addition, overall, economic momentums remain intact and accommodative financial conditions and friendly fiscal policy will support outlook. Core PCE inflation for Q1 revised lower to annualized 1.6% from 1.7% in Q1. The slight reduce will lower Fed rate expectation, allowing risk asset to improve. Finally, Fed Beige Book for the 12-13 FOMC meeting indicate few changes in the momentum of growth outlook. There was a bit of natural softening in consumer activity but nothing that would shift expectations. With outlook for employment and wage growth expected to remain strong but not to accelerate we should see weaker USD on macro backdrop improvements.

By Peter Rosenstreich

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