Third-quarter U.S. GDP increases a better-than-expected 3.4% as September inflation accelerates
The U.S. economy showcased stronger-than-expected momentum with a 3.4% GDP growth in the third quarter, coupled with an uptick in inflation, as reported for September. This performance suggests resilience in consumer spending even as inflation pressures persist. The personal consumption expenditures price index rising to an annual rate of 3.7% prompts questions about the Federal Reserve's next steps regarding interest rates and market positioning. Current market expectations may need to adjust as traders digest these solid growth figures alongside inflation data.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). CNBC's report aligns more closely with the upper third — JPMorgan supports the bullish sentiment reflected in the GDP data.
How firms align
JPMorgan's stance comes with a target of 1.10, reinforcing bullish sentiment following the GDP release. In contrast, BofA positions itself with a contrary outlook at 1.04, suggesting a more cautious view relative to the robust growth data. See our internal reports for more details on firm positions.
What the data shows
The strong GDP growth rate has led to a potential reassessment of future forecasts, aligning growth with inflationary pressures as seen in recent analytics. For further insights, refer to our research ID '/research/...'.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01U.S. GDP growth outpaces expectations at 3.4%.
- 02Inflation data could influence the Fed's next interest rate decision.
- 03Watch for potential FX volatility around key inflation reports.
- 04A breach above 1.10 in EUR/USD may offer new trading opportunities.
Market implications
Traders should closely watch the upcoming inflation reports that could reinforce or counter the recent GDP data trends. A sustained move in EUR/USD above the 1.10 level may indicate momentum in the bullish direction as firms adjust their forecasts.
Risks to this view
If inflation readings start to fall significantly contrary to expectations, it could lead to a reversal in market sentiment, prompting a reassessment of growth prospects and likely Fed actions.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.75
Sources & References
How we cover this story