US dollar retreats despite strong GDP growth as Fed rate outlook remains uncertain

The US dollar declined against major currencies on Thursday, October 29, as investors assessed stronger-than-expected economic growth, accelerating inflation and the Federal Reserve's reluctance to signal another interest rate increase in December.

The greenback struggled to recover after Wednesday's Fed decision, despite economic figures showing continued resilience in consumer spending and business investment.

Price overview

The US Dollar Index declined 0.19% to 102.00 points in Thursday's trading.

EUR/USD rose 0.04% to $1.1162, while USD/JPY gained 0.05% to 157.92 yen.

GBP/USD advanced approximately 0.26% to $1.3364.

US economic growth exceeds expectations

The American economy expanded at an annualized rate of 3.4% in the third quarter, exceeding expectations of 3.2% and accelerating from 2.2% in the previous quarter.

Meanwhile, the Federal Reserve's preferred inflation measure, the personal consumption expenditures price index, accelerated to 3.6% annually in September, compared with 3.4% in August.

Core inflation reached 3.1%, reinforcing concerns that price pressures remain persistent.

Fed uncertainty weighs on dollar

The Federal Reserve maintained interest rates at 3.75%–4.00% on Wednesday, with two policymakers favoring an immediate quarter-point increase.

However, Chairman Kevin Warsh avoided committing to another increase in December, disappointing investors who had anticipated clearer guidance.

The uncertainty limited the dollar's ability to benefit from stronger economic data.

Euro gains after ECB decision

The euro strengthened modestly after the European Central Bank maintained its main refinancing rate at 2.65%.

Investors continued assessing the possibility of further European monetary tightening as elevated energy prices threaten inflation.

Market outlook

The dollar remains sensitive to changes in Treasury yields and expectations for December's Fed meeting.

The Dollar Index faces resistance around 102.46, while support stands near 101.95. Further weakness could follow if investors reduce expectations of another US interest rate increase.