Today's GDP data further highlights the superiority of the US economy compared to other major countries.

The US GDP release (October 26th) shows that the economy in the third quarter of 2023 grew at its fastest rate in nearly the past two years. The US Dollar Index (DXY) immediately strengthened by approximately 0.3% to 106.87 in response to this news.

us dollar

The US Bureau of Economic Analysis revealed that the Gross Domestic Product (GDP) grew by 4.9% (quarter-over-quarter) in the third quarter of 2023. This figure is significantly higher than the consensus estimate of 4.3% and indicates a sharp acceleration compared to the 2.1% growth in the previous quarter.

This report further highlights the superiority of the US economy compared to other major countries. Additionally, some market participants are beginning to reconsider the possibility of further interest rate hikes by the Federal Reserve.

"It is reinforcing the message that the U.S. is sort of hanging in there on the economic side and inflation is also remaining somewhat stubborn," said Brad Bechtel, global head of FX at Jefferies in New York.

"At the margin, that helps the dollar," Bechtel said.

Quincy Krosby Chief Global Strategist at LPL Financial, has expressed concerns that, despite the market's lack of anticipation for an interest rate hike at the forthcoming Fed meeting, the Fed may indicate the necessity to increase rates again before the year's end if inflation doesn't recede rapidly and if the economy persists in exceeding expectations, potentially impacting consumer spending.

These data points have driven the US Dollar to strengthen against all major currency pairs. USD/JPY has even managed to break through the 150.00 threshold for the second consecutive day, reaching a new high not seen since October last year. Today's European interest rate announcement also supported the strengthening of the US Dollar.

This is because the ECB failed to convey an optimistic message to market participants. As a result, EUR/USD is now languishing at its lowest range for this year.