Breaking: US economy shrinks by 1.4% annualised in Q1 versus 1.1% expected growth

The US economy unexpectedly shrank at an annualised pace of 1.4% in Q1 2022 versus expectations for a 1.1% growth rate.
The downbeat growth data triggered weakness in the US dollar, with the DXY dropping back from the upper 103.00s to around 103.50.

FXStreet Team FXStreet

The annualised pace of US real GDP growth in Q1 2022 came in at negative 1.4%, according to data released by the US Bureau of Economic Analysis on Thursday. That was a big miss on expectations that the economy had grown at an annualised pace of 1.4% in Q1 and marked a significant turnaround in fortunes from Q4 2021's robust 6.9% annualised growth rate.

Meanwhile, the GDP Price Index for Q1 saw a bigger than expected jump to 8.0% from 7.1% in Q4 versus an expected rise to 7.3%, though Core PCE Prices saw a slightly smaller than expected rise to 5.2% from 5.0%, versus forecasts for a 5.4% rise.

Market Reaction

The US Dollar Index (DX) immediately dropped back from the upper 103.00s and is now trading just above 103.50 in wake of the massive miss on growth expectations for last quarter. Some might argue that the data might deter the Fed from raising interest rates quite so aggressively in the coming quarters. At the very least, it diminishes the argument for the Fed to take interest rates back into outright restrictive territory (i.e. above 2.5%).

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