US Q3 GDP Preview - Unlikely to Change the Fed's Hiking Intentions
US Dollar and US Q3 GDP Talking Points:
- The first look at Q3 US GDP may give the greenback another leg-up.
- The Fed is unlikely to waiver from tightening monetary policy.
The DailyFX Q4USD Forecast is available to download.
US Q3 GDP Outlook
The first look at US Q3 GDP is expected to show the US economy growing at 3.3% (q-o-q), down from last quarter but still running at a healthy expansion of expansion. The slowdown in growth versus Q2 is likely down to the USD1.5 trillion tax cut stimulus seen earlier in the year, although consumer spending and increased business investment may still be feeding through. An upside beat in today’s release should push the US dollar even higher and back to last year’s highs. Thursday’s durable goods figure beat expectations - +0.8% vs. -1.5% expected - while Wednesday’s Composite PMI was released at 54.8 compared to September’s reading of 53.9.
The recent Federal Reserve Beige Book highlighted economic activity across the US expanding modestly to moderately although ‘labor shortages were broadly noted and were linked to wage increases and/or constrained growth’. Higher prices were also noted, lending further credibility to the Fed’s current interest rate path, something that will continue to anger US President Donald Trump. Another 0.25% interest rate hike is fully expected in December with an additional three interest rate increases priced in for 2019.
DailyFX analyst Justin McQueen will be covering the US GDP report live from 12:15 GMT
US Dollar Basket (DXY) – Stair Stepping Higher
Price action this week confirms a strong US dollar complex with five higher lows made in a row with the recent ‘double-top’ highs at 95.68 - made on October 4 and 9 - now acting as support. Today’s tight range is expected before an important release and a stronger-than-expected number today could fuel the USD towards the recent 16-month high at 96.60.
US Dollar Basket (DXY) Daily Price Chart (March – October 26, 2018)
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--- Written by Nick Cawley, Analyst
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.