The US Bureau of Economic Analysis (BEA) is set to release its preliminary estimate for first-quarter Gross Domestic Product (GDP) on Wednesday, with analysts forecasting a sharp slowdown in economic growth. Expectations point to an annualized growth rate of just 0.4%, a significant drop from the 2.4% recorded in the final quarter of 2024.
Markets are closely monitoring this release, as it is regarded as one of the most impactful economic indicators of the quarter. In addition to the headline GDP figure, the report will also include Personal Consumption Expenditures (PCE) data, the Federal Reserve’s (Fed) preferred inflation gauge. This data carries particular weight in light of President Donald Trump’s recently imposed tariffs, with investors looking for signs of their effect on the economy.
The release follows the Federal Reserve’s March 18-19 meeting, during which policymakers revised their growth expectations for 2025 downward, while slightly increasing their inflation forecast. The Fed’s updated Summary of Economic Projections (SEP), commonly known as the “dot plot,” highlights the uncertainty surrounding the US economy’s outlook.
The GDP report will also feature the GDP Price Index, or deflator, which measures inflation across all domestically produced goods and services, including exports but excluding imports. This index is expected to rise to 3.1% for the first quarter, up from 2.3% in Q4 of 2024, providing further insight into inflation’s impact on economic output.
Adding to the market’s caution, the Atlanta Fed’s GDPNow model, known for its real-time economic tracking, has predicted a sharp 2.7% contraction in Q1 GDP, as of its latest update on April 27.
The report, due at 12:30 GMT on Wednesday, could have a significant impact on the US Dollar, as investors assess the strength of the economy amid ongoing inflation concerns and trade uncertainties. If the GDP figure exceeds expectations, it could temporarily alleviate concerns about stagflation, offering brief support to the US Dollar.
However, the broader outlook for the US Dollar Index (DXY) remains bearish, as it continues to trade below both its 200-day and 200-week moving averages, with support seen at 97.92, the 2025 low marked on April 21. A recovery, if it occurs, could face resistance at the 100.00 psychological level and higher levels.
Momentum indicators further reinforce the bearish sentiment, with the Relative Strength Index (RSI) at around 36 and the Average Directional Index (ADX) above 55, signaling strong downward momentum.
Related Topics:
