30 Jan 2025

• The United States Gross Domestic Product is expected to grow at an annualised rate of 2.6% in Q4 2024.
• The US economy is expected to keep growing at a healthy pace.
• The US Dollar is in recovery mode amid ruling risk aversion.
• The Bureau of Economic Analysis (BEA) of the United States is set to publish the preliminary estimate of the Gross Domestic Product (GDP) for the fourth quarter, covering October to December, on Thursday. Analysts expect the report to reveal an annualized economic growth rate of 2.6%, which is a modest decrease from the 3.1% recorded in the third quarter of the year.
• The upcoming preliminary GDP release from the Bureau of Economic Analysis (BEA) is of paramount significance for financial markets, as it serves as a key indicator of the economic well-being of the United States. In addition to the growth figures, the report will also present updated Personal Consumption Expenditures (PCE) - Price Index data, which is regarded as the preferred measure of inflation by the Federal Reserve.
• The current situation presents some complexities, as the Federal Reserve has announced its decision to maintain interest rates prior to the updates on GDP and PCE, leaving financial markets to process this information.
  
  In December, the Fed released its most recent Summary of Economic Projections (SEP), commonly referred to as the dot plot, which indicated upward adjustments for the year-end growth forecast for 2025, increasing from 2% to 2.1%, and for core inflation, rising from 2.1% to 2.5%. Overall, the latest SEP implies that policymakers foresee ongoing economic growth and inflation rates remaining above the 2% target for an extended period.
  
  In addition to the overall GDP figure, market analysts expect the Q4 core PCE Price Index to register at 2.5%, an increase from the 2.2% recorded in Q3.
  
  Furthermore, the report encompasses the GDP Price Index, which monitors price fluctuations of domestically produced goods and services, including exports but excluding imports. This index offers insight into the impact of inflation on GDP. For the fourth quarter, the GDP Price Index is projected to rise by 2.5%, compared to a 1.9% increase noted in the third quarter.
  
  Additionally, it is important to mention that the GDPNow model from the Federal Reserve Bank of Atlanta has revised its estimate for real GDP growth in the fourth quarter of 2024 to 3.2% as of Tuesday, an increase from the previous estimate of 3.0% on January 17.

• When will the GDP print be released and how can it affect the USD?

  The United States GDP report is scheduled for release at 13:30 GMT on Wednesday. Alongside the primary real GDP figure, variations in private domestic purchases, the GDP Price Index, and the Q4 PCE Price Index may influence the valuation of the US Dollar (USD).
  
  A GDP headline that exceeds expectations could bolster the Federal Reserve's dovish stance and exert downward pressure on the USD, whereas disappointing figures could produce the opposite effect on the American currency.
  
  Valeria Bednarik, Chief Analyst at FXStreet, notes: “The US Dollar Index (DXY) has rebounded in a risk-averse climate at the start of the week, yet it remains significantly below the monthly peak of 110.18 reached in mid-January. Concurrently, the current upward movement appears to lack momentum, as indicated by technical analysis on the daily chart. The intraday high of 108.50 from January 23 serves as an immediate resistance level, followed by the 109.00 mark. If the index breaks through this level, traders will likely target the 109.40-109.50 range as a potential bullish objective.”
  
  Bednarik further states: “A drop below 107.75, which is the intraday low from January 29, would expose the monthly low at 106.97. Nevertheless, given the prevailing risk-averse sentiment, any declines in the US Dollar may be perceived as buying opportunities, with further decreases appearing unlikely in the short term.”
  
  (An earlier version of this report was amended on January 30 at 07:34 to clarify that GDP is projected to grow at an annualized rate of 2.6% in Q4 2024, rather than 2.8%.)