U.S. dollar holds steady as U.S. GDP figures show robust growth in Q3

68

30th November 2023 – (New York) In late trading on Wednesday, the US dollar maintained its stability following the release of strong revisions to the US gross domestic product (GDP) data for the third quarter. The dollar index, which gauges the performance of the greenback against six major currencies, experienced a marginal increase of 0.02 per cent, reaching 102.7643.

According to the US Commerce Department, the country’s GDP expanded at an annualised rate of 5.2 per cent in Q3, surpassing the initial estimate of 4.9 per cent. The revised figures revealed better-than-expected non-residential fixed investment and state and local government spending. However, consumer spending growth slightly declined to 3.6 per cent from the advance estimate of 4 per cent.

The revision in GDP figures had a positive impact on Wall Street, resulting in slight upward movements, while the remarks from Federal Reserve officials left uncertainties regarding the duration of the central bank’s restrictive policies. Yields on US government bonds continued their recent downward trend.

JPMorgan Chase CEO, Jamie Dimon, delivered a critical assessment of the American economy, expressing concern for the lower-income segment. Dimon stated, “If you look at the US, yes, we have almost all-time low unemployment, but inflation is hurting people. The bottom third, I kind of think they have a right to be pissed off. I would probably be a little pissed off if I were them.”

In the eurozone, Germany witnessed a decline in its inflation rate to 2.3 per cent in November, reaching its lowest level since June 2021. In late New York trading, the euro experienced a slight decrease to 1.0982 US dollars from the previous session’s 1.0990 dollars, while the British pound saw a rise to 1.2707 US dollars from 1.2698 dollars.

Capital Economics’ Jonas Goltermann stated in a report that the Japanese yen is likely to benefit as G10 central banks conclude their tightening cycles, while the US dollar is expected to weaken over the next few years. The US dollar was valued at 147.2500 Japanese yen, slightly lower than the previous session’s 147.4240 Japanese yen.

Against other currencies, the US dollar declined to 0.8729 Swiss francs from 0.8777 Swiss francs, and rose to 1.3584 Canadian dollars from 1.3568 Canadian dollars. Additionally, it increased to 10.3537 Swedish kronor from 10.3320 Swedish kronor. Gold futures on the New York Mercantile Exchange’s COMEX division experienced a rise as bond yields from the US Treasury fell.

The most active gold contract for February delivery saw a gain of 6.90 US dollars, or 0.33 per cent, closing at 2,067.10 dollars per ounce.

The US Commerce Department’s report revealed that the country’s GDP grew at an annualised rate of 5.2 per cent in Q3, surpassing the previously reported growth of 4.9 per cent. This represents the fastest pace of expansion since Q4 2021. Despite robust economic data, gold’s growth was somewhat capped.

Federal Reserve Bank of Atlanta President Raphael Bostic expressed his expectation of a slowdown in US growth and continued easing of inflation due to tight monetary policies. Bostic stated, “The research, data, survey results, and input from business contacts tell me that tighter monetary policy and tighter financial conditions more broadly are biting harder into economic activity. I don’t think we’ve seen the full effects of restrictive policy, another reason I think we’ll see further cooling of economic activity and inflation.”

Richmond Federal Reserve Bank President Thomas Barkin voiced scepticism regarding inflation descending to 2 per cent and expressed his preference for the option of another rate hike if inflation gains momentum. Barkin commented, “If inflation is going to flare back up, I think you want to have the option of doing more on rates.”

Market analysts maintain a bullish outlook for gold in the near term. Silver for March delivery experienced a rise of 14.10 cents, or 0.56 per cent, closing at 25.443 dollars per ounce. Platinum for January delivery fell by 8.80 dollars, or 0.93 per cent, reaching a closing value of 941.40 dollars per ounce.