The United States GDP data were released today slightly lower than expected at 1.8 percent compared to a predicted 2 percent. Growth in the US economy slowed down this quarter compare to last quarter which had a 3.1 percent growth. This was mainly due higher food and gasoline prices which affected consumer spending, and caused inflation to rise at its fastest rate in two and a half years.
Output also declined due to harsh winter weather, a rise in the number of imports as well as the lowest level of government spending in over 27 years.
Chief economist at Pierpont Securities in Stamford, Connecticut , Stephen Stanley commented: “The biggest factor was weather. It hurt consumption and construction. Energy also hurt consumption as well. Higher gasoline prices took a bigger bite out of people’s budget.”
The Federal Reserve acknowledged the slowdown in first quarter growth in the economy and firmed its view that it was in no hurry to change its monetary policy. It plans to allow the %600 billion bond buying program to end on June 30.
Another report today was released at the same time as GDP showing a rise in the number of unemployment benefit claims last week, which was higher than expected. This also casts a shadow on expectations for an increase in output in the next quarter.
Upon release of the news, EURUSD spiked over 20 pips from 1.4786 to 1.4810. After a slight correction, EURUSD continued moving up to as high as 1.4851.