USD down on higher than expected inflation and slightly worse job claims; GBPUSD set for the third weekly gain but may face Scottish election risks

• US Q1 GDP higher than expected, but jobless claims slightly missed forecast
• GBPUSD ready for the third weekly gain but may face Scottish election risks
• Brazilian Real bulls see a positive outlook as pandemic eases

US released its Q1 GDP on Thursday, showing an annualized rate of 6.4% on a QoQ basis, up from the 4.3% in 20Q4 and beating the forecast at 6.1%. The acceleration was largely due to the $1.9 trillion stimulus package approved by Congress, which has pushed the real consumer spending to grow at an annualized rate of 10.7%. On jobless claims, the figure for last week landed at 553k, slightly missed the forecast at 549k but nevertheless lower than the prior release at 566k. Continuing claims were flat at 3.66 million. As a result, USD and 10-year yields ticked down, as the market expecting a higher inflation ahead.

GBPUSD eased from the Thursday high and looks set for the third weekly gain. However, the upcoming Scottish elections next week may pose a political risk. So far, the support on GBP has been coming from smooth rollouts on vaccination and sharp decreases on COVID cases. However, voters across Scotland will vote on May 6 that could potentially lead to another referendum on independence. Currently, the forecast is expecting a pro-independence majority, but some analysts say that Johnson will reject any call from Scotland for a referendum.

Brazilian Real is seeing some upward strength and may be the strongest in almost a year as the pandemic eases its impact and starts to fuel some market optimism. The pace of vaccination accelerated in April to reach a daily average of 765k, versus the 470k in the previous month. In the past seven days through Wednesday, BRL has advanced nearly 4.2% against USD. Currently USDBRL trades around 5.34 and some bulls are expecting it to reach the level of 5. Other than the pandemic news, ongoing monetary tightening that is rarely seen among major economies, strong USD inflows due to rising exports, as well as higher commodity prices are also supporting the gains on currency.