Final US Q2 GDP growth beats estimates, leading to a reduction in Fed rate cut bets and a rally in the US dollar. US stocks trim losses. Gold remains resilient.
Volatile moves in FX and US stock indices, Gold traded firm ahead of US PCE data
Key takeaways
- Finalised Q2 GDP grew 3.8%, above the 3.3% estimate, marking the strongest expansion since Q3 2023.
- Fed rate cut bets trimmed: Stronger growth reduced odds of a December Fed rate cut to 58% from 79% a week ago, tempering easing expectations.
- The US dollar jumped to a 3-week high (98.46), while US stock indices pared losses after rebounding near their 20-day moving averages.
- Gold held firm above US$3,688 support, while Asia-Pacific equities saw mixed moves; US stock index futures edged slightly higher.
The finalised second-quarter US GDP growth reading grew faster than expected at an annualised rate of 3.8%, significantly higher than the second estimate of 3.3%, and marking the strongest economic growth performance in the US since Q3 2023.
Bets on Fed funds rate cuts for the expected third cut in 2025 have been dialled back due to stronger-than-expected US Q2 GDP data. Based on the latest data from the CME FedWatch tool, the odds for the expected third rate cut on the 10 December FOMC meeting have been reduced to almost a coin flip of 58% chance of a 25 basis points (bps) cut to bring the Fed funds rate lower to 3.50%-3.75% from a 79% probability recorded a week ago.
The reduction of Fed rate cuts bets implied by the latest trading behaviour of Fed funds futures traders has led to a volatile jump in the US dollar on Thursday, 25 September, where the US Dollar Index rallied by 0.6% to close at a three-week high of 98.46, and traded back above its 20-day and 50-day moving averages.
In today’s Asia session, the US dollar seems to be in a consolidation mode ahead of today’s key US PCE inflation, personal spending, and income data releases. The US Dollar Index retreated slightly by 0.1% led by bounces in the EUR and GBP.
Despite heavy intraday selling on Thursday, 25 September, driven by overvaluation concerns in mega-cap technology stocks and a potentially less dovish Fed, major US stock indices managed to trim losses by the close.
The S&P 500 pared an initial 1% decline to finish down -0.5%, while the Nasdaq 100 and Dow Jones Industrial Average each closed lower by -0.4%. Notably, the recovery in all three indices coincided with a rebound near their respective upward-sloping 20-day moving averages, underscoring these levels as near-term support.
In today’s Asia session, both the S&P 500 and Nasdaq 100 E-mini futures have recovered slightly by 0.2% and 0.1% respectively, at the time of writing. Mixed performances are seen among the Asia Pacific stock markets, Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index shed -0.9% and -0.5% respectively. Australia’s ASX 200 managed to record a modest gain of 0.2% while Singapore’s Straits Times Index traded almost unchanged.
Gold (XAU/USD)’s bulls have remained resilient despite a firmer US dollar seen since the start of the week. The precious yellow metal has managed to record a minor gain of 0.4% on Thursday, 25 September. In today’s Asia session, it is trading almost unchanged at US$3,745 and holding above a key short-term support at US$3,688.
Our YouTube video above contains the latest intraday technical analysis on the US Wall Street 30, US Nas 100, US SPX 500, Hong Kong 33, Japan 225, Germany 30, EUR/USD, GBP/USD, AUD/USD, USD/JPY, Gold (XAU/USD), and West Texas Oil.
