Dollar steady as US data encourages
The dollar was little changed despite news that the US economy grew 4.8 per cent during the first quarter of 2006, its fastest rate in two and half years, according to figures from the Commerce Department.
This was compared to GDP growth of just 1.7 per cent in the last quarter of 2005.
This afternoon the dollar was at 1.2622 to the euro and at 1.8205 against sterling.
In the aftermath of hurricanes Katrina and Rita the US government increased its spending dramatically to fund reconstruction in the areas affected. This has boosted growth during last quarter.
Consumer and business spending has also had a positive impact on growth, as well as increased investment.
But experts predict growth to slow following the recent surge as various factors filter through into the economy. The huge US trade deficit could stifle growth going forward, analysts say.
Peter Morici, an economist at the University of Maryland, said: "With crude oil prices soaring and China investing in new export capacity at a breakneck pace, the trade deficit will continue to pull down US growth."
High oil prices and a housing market slump could also have a negative impact on growth, according to Ben Bernanke, chairman of the Federal Reserve.