* U.S. GDP rises 2.1% in Q2, better than expected
* Data does not change Fed expectation for a rate cut next week
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
(Recasts, adds comment, FX table, U.S. GDP data, updates prices, changes byline, dateline; previous
LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, July 26 (Reuters) - The dollar climbed to two-month peaks on Friday and was on pace for a
second straight weekly gain after data showed the world's largest economy slowed at a less-than-expected
pace in the second quarter.
The dollar's rise was also helped by widening yield differentials between U.S. and German debt.
Spreads were holding at two-month highs at 249 basis points.
Investors were disappointed by a lack of policy action from the European Central Bank at a meeting on
Thursday. Their attention will now shift to a Federal Reserve meeting next week, where policymakers are
expected to cut interest rates by a quarter of a percentage point.
A better-than-expected U.S. gross domestic product report for the second quarter is not likely to
change the Fed's mindset, analysts said.
Data showed U.S. GDP grew at a 2.1% annualized rate in the second quarter. The economy advanced at an
unrevised 3.1% pace in the first quarter. Economists polled by Reuters had forecast GDP rising at just a
1.8% rate in the second quarter. "You continue to see this theme that the U.S. is growing well, better than most G7 economies,
consistent with dollar strength that we're seeing on the back of this," said Erik Nelson, currency
strategist at Wells Fargo Securities in New York.
"I don't think it changes all that much for the Fed next week. We still expect a 25 basis-point cut at
the meeting," he added.
In midmorning trading, the dollar index .DXY was up 0.1% at 97.927, after earlier hitting its
highest level since late May.
The greenback was little changed against the yen at 108.66 yen JPY= .
Steve Blitz, chief U.S. economist at TS Lombard, believes that with the GDP data, Fed Chairman Jerome
Powell would have a hard time convincing the hawks on the Federal Open Market Committee of the need for a
quick 50 basis-point cut.
"So here is the Fed, faced with overall growth at trend created by the combination of a slowing
business sector yet still strong consumption — a function of stable if slower employment growth and a
strong stock market," Blitz said.
In other currencies, the euro EUR= was down 0.2% at $1.1127, recovering from a two-month low of
$1.1102 after the ECB decision on Thursday. For the week, the single currency is down 0.8%.
After the ECB session, President Mario Draghi indicated the bank was prepared to cut rates at its next
meeting, in September, and consider other options for easing.
Sterling, meanwhile, slipped 0.2% to $1.2425 and was on course for a 0.6% weekly loss. Cable has
stabilized since Boris Johnson became Britain's new prime minister, but uncertainty remains about the
country's negotiations to leave the European Union.
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Currency bid prices at 9:56AM (1356 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1128 $1.1145 -0.15% -2.97% +1.1150 +1.1126
Dollar/Yen JPY= 108.6600 108.6200 +0.04% -1.45% +108.8200 +108.5700
Euro/Yen EURJPY= 120.93 121.09 -0.13% -4.19% +121.1900 +120.9200
Dollar/Swiss CHF= 0.9935 0.9906 +0.29% +1.23% +0.9937 +0.9901
Sterling/Dollar GBP= 1.2406 1.2454 -0.39% -2.75% +1.2462 +1.2408
Dollar/Canadian CAD= 1.3186 1.3161 +0.19% -3.31% +1.3193 +1.3157
Australian/Doll AUD= 0.6915 0.6950 -0.50% -1.90% +0.6955 +0.6917
ar
Euro/Swiss EURCHF= 1.1059 1.1042 +0.15% -1.73% +1.1061 +1.1038
Euro/Sterling EURGBP= 0.8970 0.8950 +0.22% -0.16% +0.8970 +0.8948
NZ Dollar/Dolar NZD= 0.6633 0.6662 -0.44% -1.25% +0.6669 +0.6635
Dollar/Norway NOK= 8.7086 8.6725 +0.42% +0.81% +8.7162 +8.6742
Euro/Norway EURNOK= 9.6919 9.6707 +0.22% -2.16% +9.7101 +9.6683
Dollar/Sweden SEK= 9.4732 9.4475 +0.09% +5.68% +9.4863 +9.4453
Euro/Sweden EURSEK= 10.5443 10.5343 +0.09% +2.73% +10.5637 +10.5277