U.S. economic growth slowed more than anticipated in the first quarter ahead of the PCE measure. The GDP came in at an annualised rate of 1.6%, below economists' forecasts of 2.4%, while the PCE price index is expected to accelerate, presenting a challenging scenario for the Fed as it navigates between taming inflation and avoiding an economic downturn. Analysts view the report as a "toxic mix" for central bankers, with slowing growth and rebounding inflation, potentially pushing back rate cut expectations and injecting uncertainty into bond and stock markets.


The S&P 500 closed lower on Thursday even as VIX plunged, driven by tech, where Meta closed 10% lower from weak guidance, although losses were minimised on intrasession gains from Alphabet and Microsoft, which reported strong results. Treasury yields climbed on data showing slowing growth but sticky inflation, pushing out rate-cut bets to September.


The gold market surged with prices going above $2,330 after U.S. GDP growth for the first quarter fell short of expectations, marking the worst growth rate in nearly two years, while the acceleration in consumer inflation drove speculation that the Fed would maintain its restrictive monetary policy for an extended period of time. Despite higher rates affecting gold's appeal, escalating price pressures boost its utility as a reinflation hedge.


Oil prices rose on Friday, on track for weekly gains hinging on gains that were made on Tuesday, as supply concerns persisted due to conflicts in the Middle East, although weak U.S. economic growth may increase demand anxiety. However, gains were capped as traders priced out expectations of an early rate cut.


The dollar is weaker ahead of inflation data, which could drive sentiment. Attention is now on the PCE price index data for March, widely seen as the Fed's most important gauge of inflation, as it could lead to a scaling back of expectations for U.S. rate cuts if the core figure comes in higher than expected. In Europe, the euro gained ground against the dollar, benefiting from the greenback's weaker tone, in addition to Eurozone inflation expectations for the next 12 months at the lowest level since December 2021, according to the ECB's Consumer Expectations Survey.