Dollar Rallies on Strong US Economic Reports

Economic Indicators - The US Q2 GDP was revised upward to +3.8% (quarter-over-quarter annualized), exceeding expectations of no change at +3.3% [2] - Q2 personal consumption was also revised upward to +2.5%, stronger than the anticipated +1.7% [2] - The Q2 core PCE price index was unexpectedly revised upward to +2.6%, surpassing expectations of no change at +2.5% [2] Labor Market - Weekly initial unemployment claims fell by -14,000 to a 2-month low of 218,000, indicating a stronger labor market than the expected increase to 233,000 [3] - Kansas City Fed President Jeff Schmid noted that the labor market remains largely in balance despite signs of cooling [4] Capital Spending - August core capital goods new orders (excluding defense and aircraft) rose by +0.6% month-over-month, stronger than expectations of no change [3] Federal Reserve Policy - Comments from Kansas City Fed President Jeff Schmid suggest that the Fed may not need to lower interest rates soon, maintaining a "slightly restrictive" policy stance to combat high inflation [4] - Markets are pricing in an 84% chance of a -25 basis point rate cut at the next FOMC meeting on October 28-29 [4] Currency Market - The dollar index (DXY) increased by +0.43% to a 3-week high, driven by hawkish US economic reports and liquidity demand due to stock market weakness [1] - The EUR/USD pair decreased by -0.44% to a 2-week low, influenced by the dollar's strength and central bank divergence, with the ECB seen as nearing the end of its rate-cut cycle [5]