A surprise upgrade to GDP growth figures for the US economy gave relief to the dollar today after it this week dropped to its lowest levels since January 2015.
Growth in the second quarter of the year reached an annual rate of three per cent, according to the US Bureau of Economic Analysis (BEA), marking an even faster acceleration from a weak first quarter, in which the economy only grew by 1.2 per cent annualised.
The upgrade was also considerably higher than preliminary estimates of 2.6 per cent, and also represented a considerably faster expansion than economists had expected, at 2.7 per cent.
The dollar rose in response to the data, undoing most of the falls in the greenback over the past week after markets pushed up the euro in response to the Jackson Hole conference.
The trade-weighted dollar index rose to an intraday high of 92.867, before retreating slightly. Yesterday euro strength pushed the dollar index as low as 91.4, the lowest since the start of 2015. The euro today fell back briefly below $1.19, after breaking $1.20 earlier yesterday.
The faster than expected growth was driven by stronger consumption spending and investment.
Meanwhile separate figures released by payrolls provider ADP showed the US private sector added 237,000 jobs in August, massively overshooting analyst predictions of less than 185,000 and adding further support to the dollar.
That represented the fastest increase in private-sector jobs since March, suggesting that the crucial non-farm payrolls data, released on Friday, could be higher than expected.
A stronger non-farm reading could boost the dollar, according to Fawad Razaqzada, a market analyst at Forex.com.
“With the dollar already adjusting sharply lower, most of the negativity may already be priced in,” he said. “So, going forward, market participants may use any piece of good news as an excuse to buy the dollar.”