Dollar Strength at New Cyclical Highs Amid Robust US Economic Growth
The US Dollar has shown resilient growth, supporting upside risks for further gains. According to Brown Brothers Harriman's Elias Haddad, a key factor contributing to the dollar's strength is the robust state of the US economy. The latest data shows that the DXY index has reached new cyclical highs.
The economic activity in the US remains encouraging, with upward revisions to domestic demand activity reflected in the third and final estimate of US Q2 real GDP, which was revised 0.7 percentage points higher to 2.2% seasonally adjusted annual rate (SAAR). The Atlanta Fed's GDPNow model estimates annualized real GDP growth of 3.7% in Q3, supported by robust consumer spending.
The strong data supporting the US economy is also driving inflation, which remains uncomfortably high above the Federal Reserve's 2% target. Headline Personal Consumption Expenditures (PCE) was 3.4% year-over-year in August, while core PCE remained at 3.0% year-over-year.