Despite a backdrop of elevated interest rates, persistent inflationary pressures, and numerous domestic and global challenges, the U.S. economy exceeded expectations with robust growth in the third quarter, propelled by a resilient consumer base.
US Q3 GDP Outlook
Gross Domestic Product (GDP), a measure of all products and services produced in the United States, increased at an annualized rate of 4.9% from July to September, according to a report from the Department of Commerce. This marked a significant acceleration from the previous quarter's unrevised 2.1% growth, exceeding economists' projections of a 4.7% GDP increase after adjusting for inflation.
In particular, consumer spending, as measured by personal consumption expenditures, increased by 4%, a significant increase from 0.8% in the second quarter, and contributed 2.7% to the overall GDP growth. Inventories played a significant role, contributing 1.3 percentage points to the overall growth rate. Moreover, gross private domestic investment increased by 8.4%, while government expenditure and investment increased by 4.6%.
Even though this report could provide the Federal Reserve with reasons to maintain its tight monetary policy, market data from CME Group indicated a low probability of an interest rate hike at the upcoming central bank meeting in December, with only a 27% chance as indicated by futures pricing following the release of the GDP figures.
ECB Rate Decision Review
The European Central Bank (ECB) has decided to maintain its present interest rates, reiterating its belief that these rates are adequate to return inflation to its target level. Informed by incoming data, the financial markets have interpreted today's communication as having a slight dovish slant.
As anticipated, the ECB has maintained its deposit rate at 4% after ten consecutive rate increases. Although several portions of the opening paragraph of the statement on monetary policy were rephrased, the overall stance remained moderately accommodating.
Christine Lagarde, the president of the European Central Bank (ECB) emphasized that the decision to maintain the status quo does not preclude future rate increases and that any discussions regarding rate cuts are premature at this time, with no immediate plans for forward guidance.
In essence, the ECB appears content with the September economic baseline and will wait until the December forecasts to draw more definitive conclusions about the evolving economic outlook.
EUR/USD Technical Analysis
In the daily chart of EUR USD, the broader market direction is bearish, where the current price trades sideways within the ascending channel. The dynamic 20 EMA is the near-term resistance, while the critical static resistance is at the 1.0692 level.
On the bearish side, a proper channel breakout with a bearish daily close could be a potential short opportunity targeting the 1.0305 Fibonacci Extension level. The alternative approach is to wait for a false break at the channel support, which could extend the correction towards the 1.0690 level. However, a valid upside pressure with a candle above the 1.0700 level is needed before aiming for the 1.0946 level.
