The Bureau of Economic Analysis (BEA) is forecasting a 4.2% annual growth rate for the US Gross Domestic Product (GDP) in Q3, marking an increase from the 2.1% recorded in Q2. This projection, due for release today at 12:30 GMT, comes amidst a downward trend for the US Dollar, fueled by speculation that the Federal Reserve will not implement further rate hikes.
Fed Chairman Jerome Powell has downplayed recession fears, stating that below-trend growth is necessary for inflation to return to the 2% target. This implies that substantial growth could obstruct attempts to manage inflation. Despite Powell's dismissal of a recession as a base case scenario, financial markets remain cautious about economic progress, particularly with the recent Israel-Hamas conflict exacerbating global growth concerns.
If the economy did expand by 4.2%, it could inspire market optimism and bolster the US Dollar. However, any gains may be balanced by a risk-on mood favoring high-yielding assets.
In light of these developments, investors are being urged to consider the Federal Reserve's position before reacting to the news. The resilience of the American economy, underscored by labor market stability, suggests that GDP figures might exceed expectations.
Currently, the US Dollar is experiencing a corrective slide against major rivals, especially the Euro, due to overbought conditions. A positive GDP figure could stimulate market optimism but limit USD's bullish potential. Conversely, a worse-than-expected reading could benefit the USD.
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