The dollar hovered above session lows against a basket of major currencies on Friday after U.S. economic growth slowed in the first quarter of the year but losses were limited by a plunge in the pound.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.08% to 91.47, but remained close to session lows of 91.30.
The Commerce Department Friday released its preliminary reading of first-quarter gross domestic product showing the U.S. economy expanded at a 2.3% annual rate as consumer spending slumped.
Yet analysts remained optimistic that economic growth will rebound in the second quarter of the year, as the first-quarter growth weakness is somewhat of a common occurance.
U.S. economic growth will be better in second quarter as the long-running seasonal adjustment problem in the GDP data means Q1 growth was likely understated, Pantheon said. “We estimate that the average error is 0.9%.”
Weakness in the dollar was limited, however, by a sharp plunge in sterling after UK first-quarter economic growth fell well short of economists’ estimates, further denting investor hopes that the Bank of England will raise interest rates next month.
GBP/USD fell 0.98% to $1.3781.
EUR/USD fell 0.16% to 1.2101. This comes a day after the European Central Bank president Mario Draghi delivered a mixed message on the Eurozone economy on Thursday. Draghi admitted that the pace of the Eurozone recovery had moderated broadly across all countries but reaffirmed his confidence that inflation would eventually hit the bank’s target.
USD/JPY fell 0.16% to Y109.13. while USD/CAD fell 0.11% to C$1.2856.