Will US GDP grow at the expected 3.2% in Q3?

• Expectations point to annualised US economic growth of 3.2% in Q3.
• The narrative of US “exceptionalism” is likely to hold firm. 
• The US Dollar’s recovery over several days remains firmly on track.

Investors await Thursday’s preliminary US growth figures, with analysts anticipating a robust annualised expansion of 3.2% for July-September, a reasonable improvement on the previous quarter’s 2.2%. The United States (US) Bureau of Economic Analysis (BEA) will publish this initial estimate of Gross Domestic Product (GDP).

How will US growth and PCE data shape markets amid geopolitical unease?

Nervousness persists among investors ahead of Thursday’s preliminary US GDP release for July-September. Of the three estimates published each quarter, this is generally regarded as having the greatest market impact. Along with the headline growth numbers, the domestic calendar features inflation readings from the Personal Consumption Expenditures (PCE) report, the Federal Reserve’s (Fed) preferred gauge of price pressures.

Evidence of any economic impact from tariffs and the continuing Middle East crisis will be closely examined, keeping the forthcoming GDP figures firmly in focus. On inflation, investors also expect the effects of Trump’s tariffs and heightened energy-price volatility to remain central concerns.

Ahead of this release, the Fed’s Committee opted for a widely expected “on hold” decision on the Fed Funds Target Range (FFTR) at its October 28-29 meeting.

Another component of the report is the GDP Price Index, often referred to as the GDP deflator. It captures inflation in all goods and services produced domestically, covering exports but not imports. With the US-Iran-Hormuz conflict continuing to affect Crude Oil prices, these figures will attract greater attention.

As of its October 28 update, the Atlanta Fed’s GDPNow model projects Q3 GDP growth of 3.3%, down from the 3.4% estimate issued on October 27. The model is widely followed for its real-time assessment of economic activity.

When is US GDP due, and what could it mean for the US Dollar Index?

A sizeable surprise in either direction in Thursday’s US GDP report, scheduled for 12:30 GMT, could be decisive for the US Dollar (USD), even as Middle East developments command almost all of the market’s attention. Investors will assess not only headline growth but also the GDP Price Index and PCE updates. These key releases could alter expectations for the Fed’s interest-rate trajectory and, in turn, the Greenback’s direction.

The Dollar’s current recovery should receive support if GDP exceeds expectations or even meets forecasts, as either outcome should sustain the US “exceptionalism” narrative. By contrast, inflation readings are expected to follow the pattern established by the CPI figures released earlier this month.

As the recovery continues, the US Dollar Index (DXY) retains a favourable broader technical outlook. 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 as long as the index holds above its 200-day SMA near 99.60. Any further advance should encounter resistance at the year-to-date high of 102.94 (October 14).

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

A bullish bias is also evident in momentum readings. The Relative Strength Index (RSI) is close to 61, while the Average Directional Index (ADX) is approaching 36, indicating that the recent advance is gathering strength.