Strong Gains for the Dollar After a Sharp Upward Revision to GDP

25 September final Q2 GDP was positively surprising, one of the largest upward revisions to a final figure in recent years, and showing the strongest growth in nearly two years. This article summarises recent events affecting the dollar, primarily GDP, then looks briefly at the charts of EURUSD and GBPUSD.

The upward revision to last quarter’s GDP seems to be particularly positive because it comes after a quarter of contraction and because the latest revision comes primarily from consumer spending:

With the first quarter’s contraction having been caused by much higher imports as companies tried to stockpile goods ahead of new tariffs, many participants had expected last quarter’s results to be positive but only because of the expected decline in imports. That seems clearly now not to be the case.

Although imports did indeed decline significantly from April, as expected, consumer spending in the USA has remained robust considering the circumstances since the end of the first quarter of 2025. Personal consumption expenditure rose 2.5% in Q2, compared to the second estimate of 1.6% and fixed investment was also revised up. These figures overall suggest that earlier worries about a downturn in the USA might be premature; the preliminary figure for Q2’s GDP has now been revised upward twice.

There’s also some evidence that the job market in the USA might not be as weak as seen in the last couple of months. 25 September’s initial jobless claims, with figures for 20 September, were significantly lower than the consensus:

218,000 was the lowest figure for two months and nearly 20,000 below the consensus. This might just be a blip, but it’s an important consideration for longer term traders in the context of much worse NFPs in the last two months. GDP will almost certainly still be lower this quarter, but less negativity from the labour market could suggest that a contraction in Q3 is questionable.

Another cut by the Fed on 29 October still seems very likely, but the probability of this has dropped slightly to around 85% in recent days, according to CME FedWatch. However, the likelihood of a cut at each of the Fed’s remaining meetings has dropped more than 20% compared to this time last week to about 60% now. For more clues on how likely the Fed is to cut twice more in 2025, traders will focus very closely on upcoming job data and 30 October’s preliminary GDP for the third quarter.

Euro-dollar Smashes Through $1.17

The euro-dollar has declined in the last couple of days as sentiment on the dollar improved, and the greenback also had a strong boost from a large upward revision to last quarter’s GDP and initial jobless claims on 25 September, significantly below the consensus. The now somewhat lower probability of two more cuts by the Fed before 2026 doesn’t seem to have affected euro-dollar much, given that the carry trade will very likely continue to favour the dollar into the first quarter of next year and possibly beyond.

On the daily chart the uptrend still seems to be active but a change to a sideways trend or downtrend now seems more possible after the strong reaction downward. Immediate continuation lower might be questionable given the presence of the value area between the 50 SMA from Bands and the 100. However, there’s no indication of saturation; the slow stochastic at around 37 is still closer to neutral than oversold.

The 23.6% weekly Fibonacci retracement around $1.15 would be a possible though aggressive medium-term target for sellers. $1.16 might be an important support though at least in the short term since there hasn’t been a break below there since early August. Ahead of 3 October’s NFP traders are also looking at PCE, preliminary inflation from the eurozone and ISM manufacturing PMI.

Cable Tests Monthly Lows After Strong US GDP

The dollar gained strongly against most other major currencies on 25 September after better jobless claims and a significant upward revision in the final figure for Q2’s GDP. Robust consumer spending in the USA and some evidence that the labour market isn’t doing as badly as had been seen in the last couple of months are positive factors for the dollar, while the Fed still seems likely to cut twice more before the end of the year. Meanwhile, there seems to be significant divergence in opinion among the Monetary Policy Committee of the Bank of England, with conflicting signals about upcoming cuts. British inflation remains very high compared to the traditional target.

The price pushed aggressively below $1.34 on 25 September to challenge intraday lows from the beginning of September, but could pause in the near future amid oversold conditions from the slow stochastic and relatively low volume. If there’s a break below $1.33, the 200 SMA would be the next likely dynamic support.

The value area between the 50 SMA from Bands and the 100 starts from around $1.347: this could cap any potential bounce. However, the price hasn’t clearly broken through the 23.6% weekly Fibonacci retracement around $1.337; this might be an important reference if there’s only one daily close below the area. 3 October’s NFP is a critical release for cable, but traders might also monitor loan and housing data from Britain on 29 and 30 September, plus possibly British political developments.

This article was submitted by Michael Stark, financial content leader at Exness.

The opinions in this article are personal to the writer; they do not represent those of Exness or FX Empire. This is not a recommendation to trade.