EUR/USD slumps as US Dollar surges on strong US data, tests 1.1700

• The Euro weakens for the second consecutive day as robust US data boosts the Greenback.
• Jobless Claims, GDP and Durable Goods all beat expectations, signaling resilient growth.
• Q2 Core PCE rises to 2.6%; focus now shifts to Friday’s August Core PCE inflation release.

The Euro (EUR) extends its decline for the second day against the US Dollar (USD) on Thursday, weighed down by a string of upbeat US economic data that boosted the Greenback across the board.

At the time of writing, EUR/USD is hovering just above the 1.1700 psychological mark, down nearly 0.30% on the day, marking its weakest level since September 11, as traders react to the stronger-than-expected US economic release. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major peers, extends its rebound, surging to 98.16, a 20-day high.

The latest round of US data releases painted a picture of resilient growth and sticky inflation, reinforcing the US Dollar’s bid. Initial Jobless Claims came in at 218K, beating expectations of 235K and down from 232K the previous week. At the same time, Q2 Gross Domestic Product (GDP) was revised higher to an annualized 3.8% from 3.3%, well above forecasts.

Durable Goods Orders also surprised to the upside, surging 2.9% in August, while orders ex-defense climbed 1.9%, pointing to firm business investment.

Meanwhile, the core Personal Consumption Expenditures (PCE) Price Index included in the Q2 GDP report rose slightly to 2.6% from 2.5%. However, investors are primarily focused on Friday’s August Core PCE inflation release, which will carry greater weight for monetary policy expectations.

The strong data mix complicates the Federal Reserve’s (Fed) cautious easing path. While markets still expect another rate cut in October, the scale of the monetary policy adjustment may be tempered if inflation remains sticky against the backdrop of robust growth.