US Dollar Weakens Versus a Basket of Major Counterparts on Disappointing GDP Growth

The US dollar declined against most of its main peers on Friday, which drove an index that tracks the greenback’s strength to its lowest level since November 9 earlier today before partly erasing some of its losses. The US currency was weaker today following a report on gross domestic product growth in the United States, which revealed data that fell short of expectations.

The US Bureau of Economic Analysis released a report containing its first estimate for the growth rate of real gross domestic product in the first quarter of 2017 at 12:30 GMT today. The bureau said that, based on data that is currently available, gross domestic product had an annualized increase of 0.7% in the last quarter, which disappointed forecasts of a 1.2% growth. The US economy grew 2.1% in the fourth quarter of 2016.

The report stated that lower private inventory investment, higher imports, and smaller state and federal government spending were among the reasons behind the deceleration in gross domestic product growth. However, today’s release is based on incomplete data that may be further revised and a second, more accurate estimate will be published by the bureau on May 26.

Other releases today failed to push the US dollar into the positive territory, despite matching or exceeding forecasts. The Bureau of Labor Statistics said that its employment cost index had a seasonally adjusted 0.8% gain in the quarter ending March 2017. The gain beat expectations of 0.6%, as salaries rose 0.8%, while benefits increased 0.7%. Salaries and benefits make up 70% and 30% of employment costs, respectively.

A new reading for the Chicago purchasing managers’ index from the Institute of Supply Management also rose above forecasts to 58.3 in April from 57.7 in March. The reading was the highest since January 2015 as demand continued to grow, which drove optimism between firms higher. Analysts had expected a reading of 56.4.

EUR/USD traded at 1.0898 as of 18:10 GMT on Friday after rising to 1.0944 at 10:45 GMT, the pair’s highest level since April 26. EUR/USD started today’s trading at 1.0866. GBP/USD climbed to 1.2963, a level last seen on September 29, from 1.2892 when the day began.

The Dollar Index, which measures the performance of the US currency against a basket of its major peers, was at 98.98 as of 18:07 GMT today after touching 98.73 at 10:50 GMT, the weakest level since November 9. The index was at 99.07 yesterday.

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