(eToro Blog) Two key pieces of data released earlier today suggests that the U.S. economy's recovery is well off the pace that the Federal Reserve would like to see. With the impending cessation of the Fed's quantitative easing program next month, markets are not only disappointed but nervous as the soft data brings into focus the difficult that the Federal Reserve is having to meets its mandates.

According to the U.S. Bureau of Economic Analysis, the U.S. economy grew at 1.8% (on an annualized basis) during the first quarter of 2011, unrevised from previous estimates, and below the 2.2% consensus of analysts polled. According to the press release, the numbers reflect a rise of only 2.2% in consumer spending, below the 2.7% initially forecast and well below the 4% increase during the last quarter of 2010.

Also, the U.S. Department of Labor reports that initial claims for benefits rose to 424,000 new claimants, well above the upwardly revised 414,000 of the previous period; analysts had predicted that new claims would all to 400,000. Analysts were closer at predicting continuing claims, with actual data showing 3.690 million, slightly better than the 3.700 million forecasted and off the 3.736 million of the previous period.

One economist noted that the decline in consumer spending as well as the upward trend in unemployment claims is likely a reflection of the recent hikes in oil and other commodity prices, and he suspects that payroll data over the mid-term is also likely to reflect that negatively.

The U.S. Dollar has been gaining in recent hours as risk aversion has returned. However in the following hours and days as the data is being digested the Dollar is expected to come under pressure. Investors will expect less hawkish steps by the Fed which will lead to more Dollar supply. The US dollar is expected to weaken especially against the Sterling which enjoys strong demand lately amid positive data but will move to ease against the Euro as well with debt fears moving into smaller proportions. On the eToro trading floor Sentiment among eToro traders of the EUR/USD pair favors selling over buying by 16 to 6. For traders of GBP/USD, eToro trading floor sentiment favors selling with 8 sellers to 1 buyer.

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