The US dollar weakened on Thursday following the worse-than-expected first-quarter GDP data. The greenback has taken a breather from its upward trajectory but could regain its footing as the Federal Reserve is not expected to cut interest rates until later this year. Can the US Dollar Index (DXY) reclaim 106.00 or 107.00?

According to the Bureau of Economic Analysis (BEA), the US economy grew 1.6% in the first quarter, down from 3.4% in the fourth quarter. This fell short of the consensus estimate of 2.5%.

Most of the expansion was driven by personal consumption, followed by gross private investment and imports. Real (inflation-adjusted) consumer spending swelled 2.5%, though this was down from the 3.3% print in the previous quarter.

For the financial markets, the wide range of inflation pressures captured eyeballs.

The GDP Price Index, a measurement of prices paid for goods and services by businesses and companies, rocketed to 3.1% in the January-to-March period. This was up from 1.7% and slightly higher than the market forecast of 3%.

The personal consumption expenditure (PCE) price index also spiked to 3.4% in the first three months of 2024, up from 1.8% in the October-to-December span. Core PCE, which strips the volatile food and energy sectors, climbed to a higher-than-expected 3.7%, up from 2%.

In other economic data, the goods trade deficit was little changed at $91.83 billion. Initial jobless claims fell to 207,000 for the week ending April 20, while continuing jobless claims eased to 1.782 million. Retail inventories excluding automobiles dropped 0.1%, and wholesale inventories declined 0.4%. The Federal Reserve Bank of Kansas City’s Manufacturing and Composite Indexes dropped to -13 and -8, respectively.

The US Dollar Index (DXY), a gauge of the greenback against a basket of currencies, fell 0.28% to 105.56, from an opening of 105.82. The index is poised for a weekly slide of 0.56%, but it is still up more than 4% year-to-date.

US Treasury yields were up across the board, with the benchmark ten-year yield firming above 4.7%. The two-year yield topped 4.85%, while the 30-year bond surpassed 4.81%.

The USD/CAD currency pair declined 0.24% to 1.3670, from an opening of 1.3703, at 18:03 GMT on Thursday. The EUR/USD advanced 0.28% to 1.0731, from an opening of 1.0701.