US GDP Quick Analysis: USD has more room to rise as Fed may settle for "one and done"


  • US GDP has come out at 2.1%, above expectations.
  • The Federal Reserve is watching the data very closely.
  • The USD has room to rise ahead of the central bank's decision.

The US economy is alive and kicking – hardly justifying the planned Fed rate cut next week – and certainly not a pre-announcement about a full loosening cycle. On this background, the greenback can continue rising.

The economy grew by an annualized rate of 2.1% against 1.8% expected. Personal consumption jumped by 4.3%  – as expected – but a robust rate in absolute terms. Moreover, headline GDP was held back by falling inventories – which are likely to rise in the following quarter.

Core prices rose by 1.8% annualized – unimpressive but far from indicating the Fed failing to reach its 2% inflation target. All in all, the first estimate of GDP shows that current economic activity is robust.

Follow all the updates in the GDP live coverage

The prospects for the Fed to signal a long cycle of rate cuts were already slim beforehand. When James Bullard – the President of the Saint Louis Fed and a known dove  – talks only about an "insurance cut", it is hard to see how Chair Jerome Powell or anybody else can "outdove" him. 

Moreover, the labor market has returned to its normal self, the consumer is out on a shopping spree, and perhaps more importantly – the US and China are resuming trade talks.

The central bank has few reasons to be worried – at least for now. A rate reduction worth 50 basis points now seems far from reality.

On this background, the US dollar has significant room to extend its gains now and also leading into the Fed decision. 

The most vulnerable currencies are probably the euro – which awaits a significant easing package from the European central – and the pound, that suffers from fresh UK-EU clashes over Brexit. Commodity currencies may drop but may find comfort in the fact that the US is growing at a rapid clip – something that could spill over to them.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

Analysis feed

Latest Forex Analysis

Editors’ Picks

Euro rolling into the Asian session flirting with the 1.1000 handle

The common currency, on the daily chart, is trading in a bear trend below its main daily simple moving averages (DSMAs). On Tuesday, the market will pay attention to the German ZEW survey.

EUR/USD News

GBP/USD: Bearish MACD highlights 2-week-old support-line for sellers

Following its pullback from 1.2507, GBP/USD has been on the sellers’ radar with the recent quotes being around 1.2430 amid initial Tuesday morning in Asia. The pair aims to revisit short-term rising trend-line.

GBP/USD News

USD/JPY traders getting set for the central banks this week

USD/JPY reversed the initial risk-off plunge and climbed from 107.70 to 108.10, recovering to its pre-weekend levels despite global financial markets following the strike on Saudi Arabia’s oil facilities over the weekend.

USD/JPY News

Investors Nervous Ahead of FOMC

There are four central bank monetary policy announcements on the calendar this week but the Fed's is hands down the most important. Euro and Pound also fell sharply on Monday.

Read more

Gold pulls back to sub-$1,500 region in search of fresh catalysts

With fewer catalysts to rely on, Gold prices trade near $1,497 during Tuesday’s Asian session. The yellow metal benefited from the drone attack on Saudi Arabian oil facilities that destroyed the oil-rich nation’s 50% output.

Gold News

Forex Majors

Cryptocurrencies

Signatures