Going into the three-day Memorial Day holiday in the USA, FX traders have been largely sidelined in front of today’s preliminary Q2 GDP data. This will be the first look at what could possibly be a sharp Q2 rebound and extend the recent rally in the USD Index.
Based on some of the critical components of the GDP reading released over the last few weeks, the headline print is forecast to show a .8% growth rate; Retail Sales printed higher, Durable Goods orders were at 3-year high and weekly jobless claims have been tracking at a 20-year low.
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Unfortunately, due to seasonal adjustments, indexing and lags in data collection, the Associative Property of mathematics is not entirely useful in forecasting GDP data and there is a risk that a weaker report unwinds some of the recent USD gains into the long weekend. However, we estimate the likelihood of a terrible, USD negative, GDP report is low and suggest maintaining a long USD bias into the release with the potential for the Greenback to reach new highs for the week.
