This afternoon it will be shown again how the American economy is running away from us – that is, Europe. The result of the US GDP growth for the first quarter will be published, and it will again show very rapid growth. According to our estimates, quarter-on-quarter growth should be 0.6% (annualized 2.4%), which will contrast sharply with the weak Eurozone result (0.1% quarter-on-quarter) to be published in a few days. Otherwise, it will be evident that the gap between the performance of America and the Eurozone will open a little more again. Incidentally, this phenomenon also reflects very well the behavior of the Eurodollar, which for the time being has no chance of moving higher on a more sustainable basis.
The performance of the American economy in the recent period, especially in the post-Covid era, is indeed a very positive surprise. If we take into account the figures for the first quarter, the average growth for the last eight quarters is 2.5%. If we were to look at the average growth over the last three years, it even attacks 3%. With such results, it is not only difficult for other advanced economies to keep up, but in addition, these are very strong numbers in a historical context. Especially if we compare today’s growth rates with what the American economy was showing in the period after the financial crisis, i.e. after 2008.
And thus we arrive at the fact that the sustainable rate of real growth has apparently shifted to a higher level, which should also correspond to higher long-term real and nominal dollar interest rates (or the so-called r* has apparently shifted higher, while this also happened for other reasons ). The conclusion that can be drawn from such a consideration is probably that unless there is a drastic negative shock, we cannot count too much on the fact that long-term rates would have a chance to fall to the levels that we observed for a long time in the pre-covid era. respectively after 2009.
*** MARKETS ***
Crown
The Czech koruna is holding positions close to EUR/CZK 25.20 despite yesterday’s drop in money market rates by approx. 10bps (depending on maturity). Encouragement in a similar way of further improvement in the mood in the domestic economy – especially consumer confidence – is good news for growth prospects this year, but the koruna was not significantly affected. In the absence of domestic macro numbers, the koruna market will closely monitor the events in the main markets, but we do not expect significant fluctuations.
Eurodollar
The Eurodollar moved above the 1.07 mark, which was helped by the good result of business sentiment in Germany.
Today, the market will focus on the US GDP result for the first quarter (see editorial for more details). In our opinion, the result should not significantly surprise the market and the reaction of the Eurodollar should not be dramatic. However, from a medium-term perspective, this will be another confirmation of the high growth differential between the US and the Eurozone, which will keep the Eurodollar at low values.
