Dollar awaits GDP data

The dollar steadied on Thursday after recovering against the euro and the yen the previous session on upbeat housing data that tilted expectations toward the Federal Reserve raising interest rates in June, but further direction rests with US GDP data due at 3.30pm Cyprus time.

The market is expecting US Q1 GDP growth to have accelerated to 5.8% from 4.8%, while GDP Deflator is seen at 3.3%. Before that, the market is also expecting UK Q1 GDP growth, forecast at 0.6%.

The unexpected 4.9% gain in April new home sales helped soothe worries about a sharp slowdown in the property market and increased chances the Fed may lift its funds rate for a 17th straight time to 5.25% at its next meeting.

Another increase would help the dollar maintain its yield advantage over the euro and yen, even as the European Central Bank is poised to press ahead with more rate rises and the Bank of Japan prepares to start doing so soon.

The dollar has been battered by speculation Washington wants a weaker currency to help shrink the giant U.S. trade deficit, especially after the Group of Seven powers explicitly called last month for emerging Asian countries to allow currency strength.

But after tumbling to one-year lows against the euro and the pound and an eight-month trough versus the yen, the dollar has bounced back as investors have cut their big bets against the U.S. currency as volatility has spiked up across asset markets.

The euro was last trading at $1.2780, above its intra-day low of $1.2747 hit in Asia and the New York close of $1.2754 Wednesday. Chart analysis by the Financial Mirror shows that a break above 1.2825 will encourage day-traders to step in, while a break above 1.2889 is now required to reinstate the up-momentum for minimum target of $1.2920, and then $1.2970. On the downside, strong support is seen at $1.2700 area.

The dollar was last trading at CHF 1.2155 against the Swiss franc, at JPY 112.71 against the yen and sterling was last at $1.8700.