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USD Drops As US First Quarter GDP Expands at 2.2%, Less Than Expected

USD Drops As US First Quarter GDP Expands at 2.2%, Less Than Expected

Tzu-Wen Chen, Technical Strategist

THE TAKEAWAY: [U.S. 1Q GDP expands at slower-than-expected pace] > [U.S. recovery still only moderate] > [USDollar weakens]

The U.S. economy grew less than expected in the first quarter of 2012. The ‘advance’ estimate released by the Bureau of Economic Analysis showed that real Gross Domestic Product (GDP) rose at an annual pace of 2.2 percent. This follows 3.0 percent growth in the previous quarter, which was the fastest rate since mid-2010. The median forecast of 85 economists surveyed by Bloomberg News was for first quarter growth of 2.5 percent. The price index for GDP purchases, a gauge of prices paid by U.S. consumers, also fell short of projections in the first quarter of 2012, rising 1.5 percent compared to 0.9 percent in the previous quarter and consensus projections of 2.1 percent.

GDP was boosted by stronger-than-expected personal consumption growth, which rose 2.9 percent from 2.1 percent a quarter ago. On the other hand, growth in private investment slowed dramatically, falling to 6.0 percent from 22.1 percent the previous quarter.

EURUSD 1-minute Chart: April 27, 2012

USD_Drops_As_US_First_Quarter_GDP_Expands_at_2.2_Percent_-_Less_Than_Expected_body_Picture_1.png, USD Drops As US First Quarter GDP Expands at 2.2%, Less Than Expected

Chart created using Strategy Trader – Prepared by Tzu-Wen Chen

The greenback fell against most of its major currency peers on the disappointing GDP print. The U.S. dollar tumbled 44 pips against the euro in the minutes following data release, and remained weaker than pre-data levels. At the time of this report, the EURUSD pair was trading at $1.3259 to the euro.

--- Written by Tzu-Wen Chen DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.