Dollar Rallies as U.S. GDP Exceeds Expectations, Reshaping Fed Rate Outlook

The dollar strengthened against major currencies following the U.S. economy's better-than-expected growth in Q2. Rising to levels not seen since August, the revised GDP figures may delay Federal Reserve rate cuts. Fed officials voice cautious optimism, emphasizing labor market dynamics amid robust output figures.

The dollar advanced against major currencies like the euro and yen on Thursday, buoyed by news of a robust U.S. economic performance. Updated figures revealed that the American GDP grew by 3.8% in the second quarter, outpacing prior estimates and shaking expectations of imminent Federal Reserve rate cuts.

Analysts were caught off guard by the economic surge, leading to a strengthening dollar, which reached new heights against the Japanese yen. Traders anticipate potential rate policy shifts, monitoring data closely as Fed officials, including Chair Jerome Powell, suggest decisions hinge on forthcoming economic indicators.

Interest rates are in the spotlight as Wall Street faces volatility. Treasury yields rose broadly, reflecting economic shifts, while Fed members debate the pace of policy adjustments. The Swiss franc declined against the dollar as the Swiss National Bank held rates steady, amidst U.S. tariff concerns challenging economic forecasts.

(With inputs from agencies.)