USD Saw Broad Rallies on Upbeat GDP Revision, Strong Jobs Data

The US economy grew at a 3.8% annualized rate in Q2 2025, according to the third GDP estimate released Thursday. This marked a significant upward revision from the previous 3.3% estimate and the fastest growth pace since Q3 2023.

The stronger reading was driven primarily by an upward revision to consumer spending, which accelerated to 2.5% from the previously reported 1.6%. Imports, which are a subtraction in the calculation of GDP, also edged higher from the previous estimates.

Key Takeaways from Q2 2025 GDP Report

• GDP Growth: Q2 real GDP finalized at 3.8% (vs 3.3% previous estimate, 3.0% advance estimate)
• Consumer Spending: Revised up to 2.5% growth (from 1.6% previous)
• Trade Impact: Imports subtracted less than previously estimated, with net trade adding 4.83 percentage points to growth
• Corporate Profits: Increased $6.8 billion in Q2, though revised down $58.7 billion from previous estimate
• Inflation: PCE price index 2.1%, core PCE 2.6% (both revised up 0.1pp)

Link to the BEA Final Q2 2025 GDP Estimate

In a separate report, U.S. durable goods orders rebounded sharply in August, rising 2.9% after two consecutive monthly declines.

The increase was driven by a surge in aircraft orders, with defense aircraft orders jumping 50.1% and non-defense aircraft orders rising 21.6%.

More importantly for Fed watchers, core capital goods orders (non-defense excluding aircraft) rose 0.6%, maintaining momentum from July’s 0.8% gain, though shipments slipped 0.3%.

Link to the Census Bureau’s durable goods report

Meanwhile, the weekly initial jobless claims fell 14,000 to 218,000 for the week ending September 20, well below the 235,000 consensus estimate.

Continuing claims for the week ending September 6 were 1,790,449, a decrease of 44,009 from the previous week. But the previous week’s average was also revised up by 2,000 from 1,932,500 to 1,934,500.

Link to Department of Labor’s jobless claims data

Market Reactions

U.S. dollar vs. Major Currencies: 5-min

The dollar surged immediately at the data releases, with USD/EUR and USD/CHF leading the charge higher as traders reacted to the stronger-than-expected GDP revision and the sharp drop in jobless claims. The initial spike saw the dollar gain across the board against all major currencies.

After the first hour, USD pulled back modestly from its initial highs, likely as some traders took profits. However, this proved to be just a brief pause. Bullish momentum resumed and intensified through the session, keeping the dollar near its intraday highs.

The sustained demand likely reflected the combination of factors:

• The significant upward GDP revision to 3.8% surprised even the optimists
• The drop in jobless claims to 218,000 suggested the labor market remained resilient despite recent Fed concerns
• The rebound in durable goods orders, particularly the solid gain in core capital goods, added to the narrative that the US economy maintained considerable momentum.

The dollar closed in the green against all major currencies, with particularly strong gains against “risk” currencies like the New Zealand dollar and British pound.

The day’s price action suggested traders were reassessing whether the Fed’s September rate cut was premature, given the economy’s apparent strength, potentially limiting the scope for aggressive easing ahead.