The US dollar rose on Thursday after weaker-than-expected GDP growth during the first quarter of 2017 was released, which may not deter the Federal Reserve from raising interest rates next week. The advance estimate of first-quarter gross domestic product showed a 1.1% annualized rate, while economists had forecast a 2.0% rise. However, investors focused on the quarterly inflation number within the GDP report, which showed that core personal consumption expenditure prices rose 4.9% in the first quarter, higher than the consensus figure of 4.7%. The market seemingly wanted to focus on this higher quarterly core PCE number, said Erik Bregar, Director, FX and Precious Metals Risk Management at Silver Gold Bull in Toronto. He added that the weak GDP, particularly with the higher core PCE, should not prevent the Fed from raising rates by 25 basis points at next week's policy meeting.
In a separate report from the Labor Department on Thursday, initial claims for state unemployment benefits decreased 16,000 to a seasonally adjusted 230,000 for the week ending April 22. Economists had expected 248,000 claims in the latest week. This report suggested a still tight labor market and also underpinned expectations for a rate increase next week. The US dollar turned positive against the yen after the data and was last up 0.3% at 134.04 yen. The dollar index rose 0.4% to 101.72, while the euro fell 0.4% to $1.10.
