Many economists, however shrugged off that performance, saying Commerce routinely underestimates growth early in the year because of challenges making seasonal adjustments in categories such as defense spending and exports.
The dollar lost 0.5% against the euro to $1.1729 and was 0.2% weaker versus the pound at $1.3086.
The market's focus was now on second quarter USA gross domestic product data due at 1230 GMT.
While the 2.6 percent growth in the second quarter signals a rebound from the previous quarter, it still falls short of the 3 percent to 4 percent growth the Trump administration has been targeting. However, most economists wouldn't attribute the growth to the president's policies, since not much has been implemented yet. And the USA dollar, which rallied after the election, has retreated sharply in recent months.
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Annual US GDP growth has come in at less than 3 per cent for 11 consecutive years, with the world's biggest economy expanding at a rate of just 1.6 per cent last year, its slowest pace since 2011.
Trump's election and promises of massive tax cuts and infrastructure spending lifted expectations on Wall Street and among economists of faster growth.
Consumer spending grew 2.8% in the second quarter, up from 1.2% the first three months of the year as Americans benefited from solid job and income growth as well as cheap gasoline. Overall, personal spending contributed 1.93 percentage points to the top-line growth figure of 2.6 percent, including 1.02 percent from goods spending.
The report could bolster expectations for another interest rate hike from the Bank of Canada, which earlier this month raised rates for the first time in almost seven years.
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Consensus expectations were for an increase of 2.5% for the quarter.
Annual wage growth has struggled to break above 2.5 percent.
The pick-up was helped by consumer spending in the quarter expanding at a pace of 2.8%, and businesses stepping up spending on equipment.
However, housing construction slowed to a 6.8 percent rate, a after an 11.1 percent surge in the winter due to warmer-than-normal weather. The good news there is that nonresidential equipment purchases increased 8.2%, its best quarter in over a year.
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