Us economy shock sends dollar into slump

Photo: T ddy

The US economy grew by just 0.2 per cent in the first quarter of 2015, according to new figures released yesterday. The data marked an unexpected drop from a forecast of 1 per cent to 1.2 per cent growth and a significant slowdown from the 2.2 per cent recorded in the previous quarter.

The figures were announced just as the Federal Reserve met to discuss the prospect of future rate rises, which were previously expected to be occurring in the near future. Indeed, the dollar has been enjoying an upswing in the past year, as the improving economic picture led the greenback higher against the euro, pound and other major currencies.

Now, though, the Federal Reserve has delayed its planned rate hike, with some experts speculating that rates may not increase this year at all. As a result, the dollar suffered its longest streak of losses since August 2013, notes Bloomberg.

The Bloomberg Spot Index declined 0.9 per cent, falling for the sixth day in the row and the weakest level recorded since 5th February 2015.

The most severe drop was against the Swedish krona (2.5 per cent), while the dollar also fell by 1.7 per cent against the euro, taking the single currency to a two-month high against its US counterpart.

"The outlook for the dollar is perhaps not as bright as many of the bulls think," commented Andrew Wilkinson, chief market analyst at Interactive Brokers LLC in Greenwich, Connecticut. "While I agree the Fed is likely to start the journey of normalizing interest rates, I think it’s going to take a lot longer than people ever expected."