Daily Commentary BY THE CURVE TEAM –

US on a Tear

30th of April, 2021

The US economy continues to recover with gusto.

GDP figures for Q1 are the latest in a raft of positive updates. Annualised, GDP grew 6.4% over Q1 to leave it just short of its pre pandemic level.

This recovery in GDP, to be just below pre pandemic levels is the same position as Australia’s GDP. Unemployment has similarly recovered drastically, with new claims in the US the lowest since the pandemic began but still higher than pre covid.

In addition $1.9 trillion of fresh stimulus is percolating in the economy. Vaccination progress has also been considerable, with 230 million Americans having had at least one shot.

For Q2, there is already talk of double digit GDP growth. The positivity continues to bring market optimism for inflation and therefore expectations of earlier Fed tapering than the
Fed are suggesting.

The latest update from the Fed yesterday played down any suggestion of early tapering, which held the line of the year so far. It seems though the market are simply awaiting the moment when the Fed changes tact in light of the surging economy.

Should the Fed change tact, then there will be a lot less pressure on the RBA to keep its QE and Yield Curve Control policy.

Josh Stewart

Associate - Money Markets