FOREX-US dollar firmer after GDP falls in Q1

By Gertrude Chavez-Dreyfuss

NEW YORK, April 30 (Reuters) - The U.S. dollar rose against major currencies on Wednesday after data 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 frontload purchases ahead of 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 forecast a 0.8% contraction in U.S. GDP, while J.P. Morgan predicted a 1.75% fall.

The GDP fall followed a 2.4% rise in the fourth quarter.

That said, consumer spending continued to grow, though at a moderate pace. Consumer spending on services – especially health care – grew 2.4% in first quarter as households remained resilient.

"A successful resolution to global trade policy would likely remove most of the volatility and uncertainty currently experienced by businesses and consumers," wrote Jeffrey Roach, chief economist at LPL Financial in emailed comments.

"Moreover, the consumer is too strong to speculate the economy has dipped into recession. Outside of the trade-induced shocks to business inventory management, the economy is holding up."

Following the data, the dollar extended gains versus the yen to trade 0.3% higher at 142.82 yen, while the euro slid 0.1% to $1.1368 EUR=EBS.

Sterling fell 0.4% to $1.3349 GBP=D3.

Traders slightly reduced bets the Federal Reserve will cut interest rates by a full percentage point this year following the data.

Still U.S. rate futures continued to point to a start to Fed rate cuts in June, with a total of four quarter-point reductions likely, bringing the rate to the 3.25%-3.5% range by year-end.