Euro jumps on weak US GDP

The Euro bounces back after slipping below the crucial support of 1.0800 in Thursday’s New York session. The major currency pair recovers as the US Dollar (USD) extends its correction after the revised Q1 real Gross Domestic Product (GDP) report showed that the United States (US) grew at a slower rate of 1.3% from advance estimates of 1.6%. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to 104.70 after posting a fresh two-week high slightly above 105.00. 

Earlier, investors were gung-ho for the US Dollar as they expected that the Federal Reserve (Fed) would not be leaning towards interest rate cuts anytime soon. Fed policymakers have made it clear that they want to see inflation slow for months to gain confidence that price pressures will sustainably return to the desired rate of 2%. 

Fed officials see more rate hikes as less likely but have kept the possibility on the table if progress in the disinflation process stalls. For fresh cues on the interest rate outlook, investors shift focus to the United States core Personal Consumption Expenditure Price Index (PCE) data for April, which will published on Friday and significantly influence speculation for Fed rate cuts in September. Annual and monthly core PCE inflation readings are estimated to have grown steadily by 2.8% and 0.3%, respectively.