US dollar rallies following forecast beating GDP print

The US dollar strengthened against the majority of its peers on Thursday following a better-than-expected domestic GDP reading.

Trade in Sterling is mixed so far this morning, with GBP/EUR muted at €1.1896, while GBP/USD edges higher to $1.3291. However, GBP/CAD and GBP/AUD are also trading flat at CA$1.7773 and AU$1.9373 respectively, while GBP/NZD firms to NZ$2.1063.

Looking ahead, the US will publish its latest core PCE price index this afternoon, which could infuse volatility into the ‘greenback’ should the data confirm cooling US inflation.

What’s been happening?

The US dollar climbed against the majority of its peers on Thursday, as it was bolstered by the latest US GDP release.

The latest estimate of growth in the second quarter printed above market expectations at 3%, against the previous estimate of a 2.8% expansion.

Turning to the euro, the single currency slumped against the majority of its counterparts on Thursday following the publication of Germany’s latest consumer price index.

The index fell more than expected in August, with the European Central Bank’s (ECB) favoured inflation reading, the harmonised rate, dropping from 2.6% to 2.0%.

Cooling inflation in the Eurozone’s largest economy ramped up ECB rate cut bets, undermining the single currency in the process.

Turning to the pound, GBP struggled to garner investor attention as a lack of UK data coupled with concerns over the overall health of the UK economy weighed on Sterling sentiment.

What’s coming up?

Turning to today, the euro could experience notable volatility as markets await the publication of the Eurozone’s own preliminary consumer price index.

With headline inflation forecast to cool from 2.6% to 2.2%, just shy of the ECB’s 2% target, could stoke rate cut bets and drag on the euro.

However, Eurozone unemployment is forecast to remain near record lows, at 6.5%, which could cushion some of the single currency’s potential losses.

Similarly, the US dollar may also experience some volatility as the US will release its latest core PCE price index.

July’s index is forecast to report an increase in US inflation, with the index expected to rise from 2.6% to 2.7%. As the index stands as the Federal Reserve’s preferred measure of inflation, this may temper Fed rate-cut bets and support the US dollar.

Turning to the pound, notable UK data remains in short supply today, which will likely see Sterling continue to trade without a clear trajectory.