Published by Global Banking & Finance Review®
Posted on April 30, 2025
5 min readLast updated: January 24, 2026
Add as preferred source on GoogleThe US dollar rose as GDP declined by 0.3% in Q1. Despite the decline, consumer spending and inflation data showed resilience.
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The U.S. dollar firmed against major currencies on a data-packed Wednesday after a report showed the world's largest economy shrank in the first quarter, worse than market expectations, but better than the dire predictions touted by some of the biggest U.S. banks.
Gross domestic product (GDP) fell 0.3% in the quarter, a Commerce Department report showed in its first estimate, undermined by a surge in imports trying to front-load purchases ahead of the Trump administration's implementation of tariffs on most goods. Data showed that pre-tariff imports surged 41.3% in the first three months of the year.
The consensus forecast was for a 0.3% rise, according to economists polled by Reuters. Goldman Sachs, however, had forecasted a 0.8% contraction, while J.P. Morgan predicted a 1.75% fall.
The first-quarter GDP drop followed a 2.4% rise in the fourth quarter.
Consumer spending, however, continued to grow, though at a moderate pace. Consumer spending on services - especially health care – grew 2.4% in the first quarter as households remained resilient.
"It's important to realize that a large chunk of the fall in GDP is due to the sharp increase in imports, which take away from GDP growth," said Oliver Pursche, senior vice president, advisor, at Wealthspire Advisors in Westport, Connecticut.
"And that's probably due to the expectation of tariffs. So, if you were to normalize that, you end up with positive GDP growth for the quarter, but it certainly doesn't bode well for Q2."
Following the data, the dollar climbed versus the yen to trade 0.3% higher at 142.77 yen , while the euro slid 0.4% to $1.1343.
The greenback was on pace for its biggest monthly decline against the yen since July 2024. Europe's shared currency, on the other hand, was on track to post its largest monthly gain since November 2022.
Sterling fell 0.5% to $1.3340 . For the month of April, the British pound rose 3.3%, its heftiest rise against the dollar since November 2023.
'WELCOME NEWS'
A separate report showing a rise in U.S. consumer spending and income as well as slowdown in annual inflation also boosted the dollar. Data showed U.S. personal income increased 0.5% in March and spending climbed 0.7%, which were both above economists' forecasts in a Reuters poll.
In the 12 months through March, the Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred inflation gauge, increased 2.3%, down from 2.7% in February. Annual core inflation also eased from the prior month, rising 2.6% after advancing 3.0% in February.
On a monthly level, both the headline and core PCE numbers were unchanged from the previous month.
"The almost unchanged level of core PCE prices in March is welcome news but, given the data precede the implementation of broad-based tariffs, core inflation will inevitably rebound sharply in the coming months," said Harry Chambers, assistant economist at Capital Economics.
Following the PCE data, U.S. rate futures continued to point to a resumption of Federal Reserve interest rate cuts in June, with a total of 100 basis points in cuts, or four quarter-percentage-point reductions likely in 2025. That brings the U.S. central bank's policy rate to the 3.25%-3.50% range by the end of this year.
In other reports, the National Association of Realtors' (NAR) Pending Home Sales Index, based on signed contracts, jumped 6.1% to 76.5 last month. The increase was the largest since December 2023.
Earlier in the session, the ADP National Employment Report showed that U.S. private payrolls growth slowed more than expected in April. Private payrolls increased by only 62,000 jobs this month after a downwardly revised 147,000 gain in March. Economists polled by Reuters had forecast private employment would advance by 115,000.
The dollar pared gains versus the yen after the ADP data.
"The GDP data and the ADP number earlier are stagflationary, with consumption still higher. Stagflation is one of the worst things for the economy," said Eugene Epstein, head of trading and structured products, North America, at Moneycorp in New Jersey, referring to a scenario where growth is weak, while inflation is higher. "The dollar was slightly firmer after the data, but overall no big moves there.
Currency
bid
prices at
30 April
07:06
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 99.443 99.175 0.28% -8.34% 99.651 99.1
index 4
Euro/Doll 1.135 1.1385 -0.29% 9.65% $1.14 $1.1
ar 323
Dollar/Ye 142.75 142.285 0.38% -9.23% 143.155 142.
n 2
Euro/Yen 161.96 162.04 -0.05% -0.77% 162.65 161.
71
Dollar/Sw 0.8228 0.8237 -0.08% -9.32% 0.8263 0.82
iss 14
Sterling/ 1.3342 1.3406 -0.48% 6.68% $1.3414 $1.3
Dollar 31
Dollar/Ca 1.378 1.3834 -0.38% -4.17% 1.3855 1.37
nadian 77
Aussie/Do 0.6407 0.6384 0.38% 3.56% $0.6418 $0.6
llar 357
Euro/Swis 0.934 0.9377 -0.39% -0.56% 0.9394 0.93
s 31
Euro/Ster 0.8505 0.8489 0.19% 2.8% 0.8538 0.84
ling 83
NZ 0.5943 0.5928 0.29% 6.25% $0.5948 0.59
Dollar/Do
llar
Dollar/No 10.3923 10.3491 0.42% -8.56% 10.4323 10.3
rway 469
Euro/Norw 11.7948 11.7976 -0.02% 0.22% 11.85 11.7
ay 66
Dollar/Sw 9.6445 9.6153 0.3% -12.46% 9.6864 9.60
eden 98
Euro/Swed 10.9536 10.9535 0% -4.48% 10.9957 10.9
en 398
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Caroline Valetkevitch; Editing by Chizu Nomiyama, Mark Potter, Paul Simao and Diane Craft)
The article discusses the US dollar's rise following a GDP decline and other economic reports.
How did consumer spending perform? It grew 2.4% in Q1, showing resilience.
What was the impact of tariffs? Pre-tariff imports surged, affecting GDP.
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