Forex News – U.S. GDP falls in first quarter

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The dollar weakened further after Gross domestic product in the U.S. rose less-than-expected in the last quarter.

A report released by the Bureau of Economic Analysis showed that GDP rose less in the first quarter of 2012 compared to the end of 2011. Growth expanded at a seasonally adjusted annual rate of 2.2 percent, from 3.0 percent. Forecasts were for GDP to rise 2.5 percent.

The main reason behind the slower growth rate was that businesses cut back on investment and restocked shelves at a slower pace, but stronger demand for automobiles softened the blow.

While that was below expectations for a 2.5 percent growth rate, a surge in consumer spending took some of the sting from the report and growth was still stronger than analysts’ predictions in an earlier estimate  early in the quarter for an expansion below 1.5 percent.

Federal Reserve Chairman Ben Bernanke said earlier this week that the central bank expects growth to remain moderate and this would be followed by a gradual pick-up.

The dollar tumbled against the yen after the news, with USDJPY falling to 80.48 from an earlier high of 80.74.

Sterling rose to a new seven-month high of 1.6257, up 0.5 percent on the day.