The recent rally in the EURUSD exchange rate could be paused after the latest GDP figures from the US.
Economists had expected a 2.9% reading for growth in the United States economy, but they got a hotter 3.2%.
EURUSD – Daily Chart
EURUSD has seen resistance near the 1.0750 price level and will look for a further catalyst to lead a correction.
The US economy grew faster in the third quarter than expected, hinting that the Fed’s efforts to tame inflation have limited growth.
The latest reading from the Commerce Department on Thursday said that gross domestic product grew at an annual 3.2% between July and September. That was higher than the 2.9% estimate from a month previous. An economist by data provider Refinitiv had expected GDP to remain unchanged from the first estimate.
The report added that the more robust performance was due to increased exports and consumer spending that were partly offset by lower spending on new homes. Consumer spending makes up more than two-thirds of the nation’s economic production.
US stocks were sharply lower on the news as traders feared a stronger-than-expected GDP would lead to more aggressive action from the Federal Reserve on interest rates.
The euro had recently been rising as traders assumed the Fed was close to a peak in interest rates while the European Central Bank would play catch up. That dynamic is now in jeopardy, and the greenback could rally against the single currency after a recent bout of weakness. However, markets are also thin due to holiday trading volumes.
“Part of the wide swings we are seeing is part of illiquidity into year-end as many traders and investors are on vacation, and each new data gets over-extrapolated in both directions,” said Keith Lerner, chief market strategist at Truist Advisory.
Tomorrow brings pricing data as Core PCE for the US economy, which could spur interest rate talk. Michigan Consumer Sentiment will close out the week for the United States ahead of the Christmas holiday weekend.
