Last Update: April 28, 2023, 02:41 IST
The currencies of 22 central banks are pegged to the US dollar. (Representational image/Reuters)
Economists polled by Reuters had forecast a 2.0% growth in GDP.
The dollar rose on Thursday as weaker-than-expected US economic growth in the first quarter is unlikely to prevent the Federal Reserve from raising interest rates next week.
Advance estimates of gross domestic product (GDP) for the first quarter showed an annual rate of 1.1 percent during the period. The economy grew at 2.6 percent in the fourth quarter. Economists polled by Reuters had forecast a 2.0 percent increase in gross domestic product.
However, investors focused on the quarterly inflation number within the GDP report. Prices for core personal consumption expenditure rose 4.9 percent in the first three months of the year, which was higher than the consensus estimate of 4.7 percent and higher than the fourth-quarter figure.
“The weak growth outlook is telling us that the Fed is going to struggle to keep raising interest rates without crushing the economy,” said Amo Sahota, director at FX consulting firm Clarity FX in San Francisco.
“But the conundrum of what to do with inflation still persists. The Fed has been telling us this for a long time. So the (core PCE) number further reinforced the fact that we are going to hike the rate next week,” he said.
Markets have priced in a 90 percent chance of a 25 basis-point rate hike at the May policy meeting, with a pause thereafter.
A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits decreased by 16,000 to a seasonally-adjusted 230,000 for the week ending April 22. Economists had expected 248,000 claims in the latest week.
The report suggested a still tight labor market and also outlined expectations for a rate hike next week.
In afternoon trade, the dollar rose 0.2 percent to 134 yen against the yen as the Bank of Japan began a two-day policy meeting, the first under new governor Kazuo Ueda.
The market consensus is that Ueda will leave ultra-easy policy settings unchanged on Friday, but no one is willing to rule out another surprise such as a shock doubling of the 10-year bond yield band in December.
The dollar index rose 0.1 percent to 101.50.
Meanwhile, the euro declined 0.1 to $1.1024.
The Eurozone’s outperformance has been a major factor for the Euro. Germany revised growth forecasts upwards again on Wednesday, and a survey showed a continued rise in consumer confidence.
Currency Quote Price at 2:56 PM (1856 GMT)
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)
