US GDP growth in Q1 2019 turned out to be noticeably higher than forecast and was previously 3.2% on an annual basis, but its structure turned out to be atypical for the United States and points to a number of quite significant changes. In particular, 1% growth was due to the dynamics of net exports, which against the background of a rather weak growth of the global economy indicates the result of the protectionist pressure of the US administration. At the same time, domestic demand growth was only 1.5%, which is less than 2% a quarter earlier. Weak retail sales and inflation dynamics indicate that consumer demand is slowing down.
Data on wages and PMI indicate that the slowdown should be developed in the 2nd quarter. The base personal consumption expenditure index of PCE was only 1.3% y / y, while it was expected to be 1.6%, weak inflation increases the likelihood of the Fed reevaluating its plans not in the direction of growth rates, but rather in the direction of reducing them.
The coming week is rich in events, among which are the Fed meeting on Wednesday and the publication of the employment report on Friday. The Fed meeting will be passing, there will be no updated macroeconomic forecasts, and the rate will remain at the current level. The markets also do not expect changes from the accompanying statement after a strong GDP report. At the same time, lowering inflation expectations may be the main topic of Powell's press conference, as it increases the likelihood of a rate cut. If Powell maintains equanimity, then the dollar will react to the outcome of the meeting with a neutral or a slight increase. Possible rate of reduction.
As for Nonfarm Payrolls, the last two reports, especially the February ones, were worse than forecasts. The ISM report on the service sector will be released after the employment report, but Markit has already contributed his share of the negative, reporting a slowdown in the creation of new jobs, so the likelihood of weak data has slightly increased. The dollar will go down if the fear is confirmed, as the second disastrous report on labor will indicate a reversal of the trend and the approach of the recession for a short time.
EURUSD
The euro looks neutral on monday; an increase in volatility may trigger a report on economic activity for April in the European Commission version, if it differs in terms of conclusions from the previously published PMI results.
The recovery potential of EURUSD is limited by the level of 1.1183, a decline to 1.1135 / 42 is a bit more likely.
GBPUSD
The CBI report on changes in the volume of industrial orders in April indicates a trend towards a slowdown in the UK economy. The overall optimism of the business prospects assessment noticeably fell, and at the fastest pace in the entire history of observations, stocks of raw materials (+ 39%), work in progress (+ 21%) and finished products (+ 25%) grew, indicating progressive marketing problems. The growth of wages and domestic prices looks positive, which allows to maintain some optimism, but on the whole, a reversal towards a slowdown has already taken place.
The Bank of England has no reason to consider options for raising rates in the foreseeable future, despite the good state of the labor market. The Brexit deadline has been extended until October 31, but there is growing political uncertainty within the country, which may lead to a new government crisis and early elections, in which the Laborists, led by James Corwin, a consistent opponent of May, have every chance of winning.
Business investments are extremely weak, and there is no hope of a change in the trend. The forecast for the pound remains negative. On Monday, GBPUSD will spend the day in the range with a downward trend, possible growth is limited by resistance 1.2961 or, less likely, 1.2991, more likely to decline to the support of 1.2864 formed last week.
