US GDP Slides Following Powell Warning

GDP UndershootsThe US Dollar rout continues this week ahead of the all-important NFP release tomorrow. DXY took another leg lower as the prelim Q2 US GDP reading yesterday came in below expectations at 2.1% vs 2.4% prior and expected. This marks the latest in a string of tier-one data points to undershoot expectations and has seen traders pairing back their near-term Fed rate hike expectations. Pricing for the September meeting is showing around a 90% probability of rates being held unchanged.Powell Cites Economic UncertaintySpeaking last week, Fed’s Powell reaffirmed the bank’s message that its main priority is bringing inflation back down to its 2% target. However, the message was well balanced, and ultimately quite neutral with Powell warning that the bank would remain data dependent with its decisions, citing the need to stay agile with decision making due to economic uncertainty.  Powell went on to say that there were signs that inflation was cooling but noted there was still a way to go.NFP Up NextOn the back of these comments and recent data, focus now turns to tomorrow’s NFP release. Yesterday, the ADP number came in below expectations and if we see a similar outcome tomorrow, this should keep USD pressured lower on reduced Fed tightening expectations.Technical ViewsDXYThe rally in the Dollar Index has stalled for now ahead of the 104.95 level with the market since turning back under the 103.48 level. With momentum studies weakening, while below this level, there is room for a deeper correction towards the 101.22 level next where we also have the retest of the broken bear channel top.