Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone [May 29, 2025]
“The US Dollar slipped on Thursday as a batch of mixed economic data cast renewed doubts over the strength of the US economy, raising the prospect that the Federal Reserve may shift toward a less hawkish stance. Preliminary figures showed that GDP contracted by 0.2% in the first quarter of 2025, slightly better than the initial estimate of -0.3%, but marking a sharp slowdown from the 2.4% expansion in Q4 2024. The downturn was largely driven by a surge in imports and weaker government spending, despite gains in investment and exports.
Adding to the negative sentiment, preliminary data on corporate profits revealed an unexpected 3.6% decline, defying consensus forecasts of a 5.9% increase. The drop in earnings reinforces fears that elevated costs and policy uncertainty are starting to weigh on business margins.
Labor market data also disappointed. Initial jobless claims rose to 240,000, the highest in a month and above expectations, while continuing claims climbed to their highest level since 2021. These signs of softening employment conditions, combined with weaker growth and earnings, undermined investor confidence in US assets.
Looking ahead, attention turns to Friday’s PCE inflation report, which could prove decisive in shaping expectations for Fed policy. Further signs of weakness may pressure the dollar further in the near term.”