By Saqib Iqbal Ahmed
NEW YORK (Reuters) - The dollar fell against a basket of currencies on Friday, snapping a three-day streak of gains, after an overall strong U.S. first-quarter growth report was overshadowed by soft inflation data.
Gross domestic product increased at a 3.2 percent annualized rate in the quarter, the Commerce Department said in its advance GDP report, released on Friday, versus the 2.0 percent estimated by economists polled by Reuters.
The dollar, however, did not enjoy a boost from the report as traders focused on the core personal expenditures consumption price index figure, the Federal Reserve's preferred inflation gauge, which increased at only a 1.3% rate versus 1.8% in the prior quarter.
"Overall, U.S. growth last quarter was outstanding. But the soft inflation components were enough to spur some profit-taking in the buck's winning week," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
"Once the dust settles, the focus should shift back to the bullish U.S. growth theme which has been resoundingly positive for the dollar," said Manimbo.
The dollar index, which measures the greenback against six other major currencies, was 0.2% lower at 98.009. The index, which hit a 23-month high earlier in the session, is up 0.7% for the week.
Recent U.S. data has been supportive of the greenback and reinforced the belief that the United States is on a firmer economic footing than other leading economies.
"There were plenty of positive headlines for the U.S. economy this week, with GDP growth accelerating in the first quarter, durable goods orders surging in March, and the S&P 500 hitting a record high," Michael Pearce, senior U.S. economist at Capital Economics, said in a note.
"But signs of underlying weakness abound which, together with the renewed softness of core inflation, will keep the Fed sounding extremely dovish next week," said Pearce.
The Fed, set to meet for two days next week, recently suspended its three-year monetary policy tightening campaign, dropping forecasts for any interest rate hikes this year.
The euro, which is hovering near its weakest level against the dollar since May 2017 amid worries about the strength of the euro zone economy, was up 0.19% at $1.1151, ahead of a national election in Spain on Sunday.
The British pound, up 0.19% on Friday, was headed to finish the week down 0.5%, dragged down by growing concern about stagnant talks around Britain’s exit from the European Union, or Brexit.
(Reporting by Saqib Iqbal Ahmed; Editing by Steve Orlofsky and Susan Thomas)