US GDP growth forecast at 3.2% in Q3

• Annualised US economic growth is forecast at 3.2% for Q3.
• The narrative of US “exceptionalism” is expected to hold firm. 
• The US Dollar’s recovery over recent days remains firmly established.

Annualised growth of 3.2% is expected for the United States (US) economy in July-September, a solid pace and a notable improvement on the previous quarter’s 2.2% expansion. Analysts’ forecasts come ahead of Thursday’s preliminary Gross Domestic Product (GDP) estimate from the Bureau of Economic Analysis (BEA).

Markets await US growth and PCE figures as geopolitical concerns persist

Thursday’s preliminary US GDP estimate for July-September is keeping investors on edge. Of the three estimates published each quarter, this release is generally regarded as having the greatest market impact. Alongside the headline growth figures, the US calendar features the Personal Consumption Expenditures (PCE) inflation report, the Federal Reserve’s (Fed) preferred gauge of price pressures.

With investors seeking evidence of any effects from tariffs and the continuing Middle East crisis, the forthcoming GDP figures remain important. On inflation, market participants also expect the effects of Trump’s tariffs and heightened energy-price volatility to stay firmly in focus.

The figures come after the Fed’s meeting on 28-29 October, at which the Committee opted for the widely expected “on hold” decision on the Fed Funds Target Range (FFTR).

The report also contains the GDP Price Index, more commonly known as the GDP deflator. Covering all goods and services produced domestically, this inflation gauge includes exports but leaves out imports. Against the backdrop of the continuing US-Iran-Hormuz conflict and its effect on Crude Oil prices, these figures will attract greater attention.

In its 28 October update, the Atlanta Fed’s GDPNow model projected Q3 GDP growth of 3.3%, down from the 3.4% forecast on 27 October. The model is closely followed for its real-time assessment of economic activity.

US Dollar Index faces GDP test with Thursday’s release

A substantial upside or downside surprise in Thursday’s US GDP report, scheduled for 12:30 GMT, could be decisive for the US Dollar (USD). Markets remain focused almost entirely on developments in the Middle East. Beyond headline growth, investors will closely examine the GDP Price Index and PCE updates, as both could alter expectations for the Fed’s interest-rate path and the direction of the Greenback.

Even a GDP reading in line with forecasts, or one exceeding them, should reinforce the US “exceptionalism” narrative and support the Dollar’s current recovery. The inflation figures, by contrast, are expected to follow the pattern evident in the CPI data published earlier this month.

As the recovery continues, the broader technical picture for the US Dollar Index (DXY) stays favourable. Trading is concentrated towards the top of the index’s 18-month range above the 102.00 threshold. The outlook is expected to stay positive provided the index holds above its 200-day SMA near 99.60. If gains extend, the next obstacle should be the year-to-date high of 102.94 (14 October).

On a pullback, the weekly low of 101.44 (22 October) offers the first downside level, ahead of interim support at the 100-day and 55-day SMAs, at 100.62 and 100.57 respectively. Below those lies the more significant 200-day SMA at 99.60, followed by September’s low of 98.59 (9 September).

A Relative Strength Index (RSI) close to 61 and an Average Directional Index (ADX) approaching 36 give momentum indicators a bullish bias, pointing to increasing strength behind the recent advance.