The US GDP report was disappointing, but market participants are more focused on one of its inflation data points. Other US economic data is also relatively good.

US Dollar Index (DXY) experienced slight gains in a narrow range below the 102.00 thresholds in Thursday's (April 27th) trading session. Some recent US economic data produced varying actual figures, but it is unlikely to deter The Fed from raising interest rates again next week.

dxyDaily DXY Chart via TradingView

The preliminary US Gross Domestic Product (GDP) report showed that the economic growth was only 1.1% in the first quarter of 2023. The growth rate was much slower than the 2.6% increase in the previous period and missed the consensus estimate of 2.0%.

Although the US GDP report was disappointing, market participants are more focused on one of its inflation data points. The Core PCE Price Index increased by 4.9% in Q1/2023, still showing an uptrend from the 4.4% increase in the previous period. Its increase also exceeded the consensus estimate, which was 4.7%.

"The knee-jerk reaction was to sell the dollar because yields turned lower after the weaker-than-expected GDP, but the market seemingly wanted to focus on the higher quarterly core PCE number," said Erik Bregar, director, FX and precious metals risk management at Silver Gold Bull in Toronto.

Bregar believes the weak US GDP data should not prevent the Fed from raising interest rates by 25 basis points at next week's FOMC meeting, especially since the core PCE continues to rise. In line with this analyst's opinion, market data shows an 88% chance of a Fed interest rate hike next week.

Other data from the US Department of Labor tonight showed that the number of jobless claims reached 230k in the week ending April 22, 2023, or lower than economists' estimate of 248k. This means the US labor market conditions are still tight and allow further interest rate hikes.

The major currency pairs moved within a limited range following the release of these US economic data. EUR/USD corrected slightly by about 0.2% but remained near yesterday's one-year high range. GBP/USD halted its bullish rally but struggled to maintain its highest level since June 2022.