Week in FX Americas – US Economy Grows but Misses Expectations

The U.S. economy grew at an annualized rate of 2.5% in the first quarter of the year. Consumer spending during that time rose at a 3.2% rate but government spending cuts had a negative effect on growth. Analysts had estimated a 3% growth so the shortfall was disappointing for the USD. Due to negative employment indicators in Europe the EUR was not able to capitalize on USD weakness. On the other hand the USD was able to advance versus the JPY as deflation continues to grow and there are questions around the Bank of Japan's policy being successful in a 2 year timeframe.

Jobless claims in the United States fell more than expected which boosted the hopes of a recovery before the GDP figures came out. Next Friday the Non-farm payrolls will be published and there will be a lot of expectation on the economic release as it could solidify the perception of a US recovery.

In Canada the deputy governor of the central bank Tiff Macklem stated that he would...