U.S. economic data released Wednesday painted a mixed picture, with growing concerns over economic momentum. The Q1 2025 Preliminary GDP came in at -0.3%, sharply down from +2.4% in Q4 2024 and well below market expectations—fueling fears of a potential recession.
On the inflation front, the March PCE Price Index showed further easing. Headline inflation dropped to 2.3% YoY (from 2.7%), and Core PCE—the Fed’s preferred inflation gauge—slipped to 2.6%, reflecting softening price pressures.
Despite slowing growth, investor sentiment has remained resilient over the past two weeks. U.S. and global equity markets continued to advance, largely buoyed by renewed optimism over U.S.-China trade relations. A Chinese Commerce Ministry spokesperson confirmed that U.S. officials had reached out multiple times to restart tariff negotiations—lifting hopes of de-escalation.
Markets Eye Key Labor Data Ahead
While short-term optimism has been supported by potential trade talks, market fundamentals now hinge on the health of the U.S. labor market, especially after the April reciprocal tariff rollout.
The April ADP Non-Farm Employment Change—often seen as a precursor to Friday’s official NFP report—showed a weaker-than-expected gain of 62K jobs, down from 147K in March, signaling potential softness in the labor market.
As markets await Friday’s Non-Farm Payroll data, a weaker print could heighten recession fears, weighing on both U.S. equities and the dollar. Conversely, a stronger reading may ease concerns and help sustain the recent momentum in the stock market.
Technical Outlook: Dollar Index, SPX500
SPX500: Decisive zone on 5800 – 5540
The SPX500 extended its rally this week, breaking above the key 5540 resistance and signaling a strong recovery. The 5540–5800 zone now serves as a pivotal range.
Holding above 5540 keeps the bullish momentum intact and opens the path toward 5800, while a drop back below 5540 could indicate a resumption of the broader downtrend.
Today’s Non-Farm Payroll data may provide clearer direction.
DXY: Struggling Around the 100 Mark
The US Dollar saw a modest rebound this week, but the DXY remains confined within the 99.00–100.50 range, keeping the near-term outlook cautious. A failure to break above 100.50 would maintain the downside bias.
A weak NFP print could trigger renewed dollar selling, while a stronger-than-expected reading may ease recession concerns, push back rate cut expectations, and support a broader recovery in the dollar.