GDP and inflation concerns drive shift in sentiment

US stocks experienced a shift in sentiment after the release of the latest GDP figures, revealing weaker economic growth alongside elevated inflation. Specifically, the core PCE prices for the quarter surged to 3.7%, surpassing the 3.4% estimate, sparking concerns among investors regarding subdued growth and rising prices.

Breaking down the numbers, Q1 GDP growth came in at 1.6% quarter-on-quarter, falling short of the 2.5% expectation and notably lower than the previous figure of 3.4%.

Meanwhile, the latest US jobless claims data painted a slightly rosier picture, with 207k claims versus the expected 215k, suggesting a relatively stable labor market. Continued jobless claims also followed suit, coming in at 1,781k, a tad lower than both the anticipated and previous figures.

In response to the weaker-than-expected GDP data, coupled with robust inflation metrics and encouraging jobless claims, the major indices weakened, reflecting concerns that the US economy exhibiting less robust momentum than initially forecasted while inflationary pressures remain.

Currency markets

the US dollar witnessed a surge:

EURUSD retreated below the 1.0700 level.

USDJPY saw an upward trajectory, reaching 155.64, fueled by heightened inflationary expectations.

Gold

Prices managed to hold above $2,300 following the tepid preliminary US Q1 GDP data, as concerns over inflationary pressures persisted. The Federal Reserve may find cause to reassess its stance on maintaining low interest rates for an extended period. The relaxation of tensions in the Middle East has fostered decrease demand for riskier assets, potentially adding pressure on safe heavens.