Dollar weakens ahead of key GDP release
The preliminary estimate of the United States Gross Domestic Product (GDP) for the third quarter is scheduled for release on Tuesday at 13:30 GMT. Markets are watching the report closely, as analysts expect the US economy to have expanded at an annualized rate of 3.2% in Q3. Although this figure is slightly below the 3.8% growth recorded in Q2, it still reflects strong economic resilience despite persistent inflationary pressures and a weakening labor market.
After the United States economy contracted by 0.5% in the first quarter, growth rebounded sharply in Q2 and appears to have remained strong through Q3. The expected 3.2% reading suggests that economic growth itself is not the primary issue. Instead, market attention has shifted toward the softening labor market and its implications for the Federal Reserve’s monetary policy outlook.
Recent labor market data has shown clear signs of cooling:
The unemployment rate rose to 4.6% in November (above the 4.4% forecast)
November job creation came in at 64K
Previous months’ employment figures were revised downward, reducing total job gains by 33K
October data was not released due to the government shutdown, adding further uncertainty
This weakening labor market may have weighed on household consumption during Q3, potentially limiting GDP growth relative to earlier expectations.
Alongside the headline GDP figure, the GDP Price Index—a broad measure of inflation for domestically produced goods and services—will also be released. The index stood at 2.1% in Q2, a notable improvement from the 3.8% level recorded at the start of the year.
A lower GDP Price Index could:
Signal easing inflationary pressures
Strengthen expectations for continued rate cuts next year
Add further downward pressure on the US Dollar
The latest estimate from the Atlanta Fed’s GDPNow model suggests real GDP growth in Q3 could reach 3.5%. Although not an official forecast, the model is widely followed as a real‑time estimate based on incoming economic data.
However, analysts caution that:
Labor market deterioration
Slowing consumer spending
Downward revisions to employment
could ultimately result in a lower actual GDP reading.
The GDP release comes at a time when the US Dollar Index (DXY) has been trending lower, currently trading near 98.30, only slightly above the December low of 97.87.
According to market analysts:
A weaker‑than‑expected GDP reading could intensify selling pressure and push DXY toward 97.46, or even 97.00
A stronger‑than‑expected GDP may trigger a short‑term corrective bounce, but is unlikely to reverse the broader bearish trend
The 100‑day Simple Moving Average (SMA100) near 98.60 acts as a strong resistance
The 20‑day SMA continues to slope downward, reinforcing selling pressure
Technical indicators remain in negative territory, confirming lower lows
Key resistance levels:
98.42 (Friday’s high)
98.60 (SMA100)
99.00 (next barrier if SMA100 breaks)
The United States economy is approaching the release of a highly anticipated Q3 GDP report—one that could influence short‑term USD direction and shape expectations for future Federal Reserve policy. While forecasting models point to growth above 3%, the weakening labor market may challenge this narrative.
With trading volumes reduced due to winter holidays, market reactions may be exaggerated and volatile. Traders are watching closely to determine whether the United States economy can maintain its resilience or whether signs of weakness will emerge in the latest data.