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The United States GDP is projected to grow at an annualized rate of 0.4% in Q1.
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Investors are keenly focused on the potential economic impact of tariffs.
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The US Dollar remains range-bound, trading at the lower end of its yearly range.
The United States Bureau of Economic Analysis (BEA) is set to release its preliminary estimate for first-quarter Gross Domestic Product (GDP) on Wednesday, with analysts predicting an annualized growth of just 0.4%. This marks a sharp slowdown from the 2.4% pace recorded in the final quarter of 2024.
Markets on Edge Ahead of Key US Growth Data
Markets are bracing for the highly anticipated release of the US preliminary GDP figures, which are considered the most market-moving data of the quarter. In addition to the growth figures, the report will include updated Personal Consumption Expenditures (PCE) data, the Federal Reserve's (Fed) preferred inflation gauge.
This quarter’s report is particularly significant as it will offer an early look at the potential economic fallout from President Donald Trump’s newly imposed tariffs. With a focus on both output and domestic prices, the data could provide valuable insights into the broader macroeconomic impact of the administration’s trade policies.
The release comes after the Fed’s March 18-19 meeting, where policymakers revised growth expectations for 2025 downwards, while slightly increasing their PCE inflation projections. This signals heightened uncertainty within the central bank regarding the balance of risks to the US economy.
The report will also feature the GDP Price Index—also known as the GDP deflator—which measures inflation across all domestically produced goods and services, including exports but excluding imports. It is expected to rise to 3.1% for Q1, up from 2.3% in the previous quarter, shedding further light on inflation’s effect on real output.
Adding to the caution, the Atlanta Fed’s GDPNow model, which tracks real-time economic activity, is predicting a sharp 2.7% contraction in Q1 GDP as of its April 27 update.
Impact of GDP Release on the US Dollar Index
The US GDP report, set for release at 12:30 GMT on Wednesday, could significantly influence the US Dollar as investors assess the strength of the economy against inflation pressures and the effects of tariffs. Alongside the headline growth figure, attention will be focused on the GDP Price Index and the Q1 PCE Price Index, as these key data points could shift expectations for Federal Reserve policy and the direction of the Dollar.
A stronger-than-expected GDP report may temporarily alleviate concerns of stagflation, potentially offering some relief for the struggling Greenback. However, the broader technical outlook for the US Dollar Index (DXY) remains bearish. The index is currently trading below both its 200-day and 200-week simple moving averages (SMAs), at 104.48 and 102.70, respectively.
Downside targets are in focus, with support seen at 97.92, the 2025 low reached on April 21, and 97.68, a key level from March 2022. Any upside correction would likely first target the psychological 100.00 mark, followed by the 55-day SMA at 103.64 and the March 26 swing high of 104.68.
Momentum indicators reinforce the bearish trend, with the Relative Strength Index (RSI) slipping to around 36 and the Average Directional Index (ADX) rising above 55, indicating strong downward momentum behind the recent move.
