US GDP and inflation data released on Thursday carry more weight than usual. With the Federal Reserve locked in a tense standoff over rates, three dissident members calling for hikes and the Middle East crisis driving up oil prices, the numbers coming in at 1:30 p.m. GMT could either validate the Fed’s cautious stance or shatter it altogether.
Key takeaways
- The US Bureau of Economic Analysis releases its preliminary estimate of second-quarter GDP at 1:30 p.m. GMT on Thursday, with analysts expecting Annualized growth of 2.1%.
- The Federal Reserve’s preferred inflation indicator, the Personal consumption expenditures (PCE)and the GDP price index will be published alongside the main figure.
- Atlanta Fed’s GDPNow model forecasts more modest Expansion of 1.6% in the second quarter as of its July 27 update, down from 1.7% on July 17.
- The Fed kept rates unchanged at its July 28-29 meeting, but three FOMC members – Beth Hammack, Neel Kashkari and Lorie Logan – dissented in favor of raising rates, marking the largest number of dissents since September 2016.
- THE US Dollar Index is trading near multi-month highs, with RSI near 63 and ADX just above 25, signaling growing bullish momentum.
What the GDP report actually contains
Thursday’s release is the preliminary estimate – the first of three quarterly GDP measures, and usually the one that moves the most in the market. Consensus forecasts indicate annualized growth in the second quarter of 2.1%according to analysts cited by FXStreet. This would represent a solid reading by recent standards, enough to keep the narrative of “American exceptionalism” alive in market conversations.
But the title number is only part of the story. THE GDP Price Index – also called the GDP deflator – will be included in the same press release. Unlike the CPI, which tracks consumer prices, the deflator measures inflation of all goods and services produced domestically, including exports but excluding imports. With the US-Iran conflict escalating and crude prices reacting, this number is attracting more attention than it normally would.
The PCE index, the Fed’s preferred inflation benchmark, rounds out what is essentially a three-data day. Markets will cross-reference the PCE reading with the CPI figures already released earlier in July. A significant divergence – one way or the other – would move things forward quickly.
The Fed’s uncomfortable position
The GDP release comes a day after the Federal Reserve concluded its July 28-29 meeting and opted to leave the federal funds target range unchanged. But “unchanged” understates the drama inside the play.
Three FOMC members voted against holding and argued for an immediate rate hike: Beth Hammack of Cleveland, Neel Kashkari of Minneapolis and Lorie Logan of Dallas. This is the largest number of dissents in favor of an increase since September 2016, according to information from CNBC. Fed Chairman Kevin Warsh directly acknowledged the tension, calling the internal debate a “good family fight.”
Warsh objected to characterizing the suspension as a “pause,” instead describing it as a “rigorous review of the economic situation.” He also promised that the Fed “would not hesitate to act” if inflation demanded it, while holding back on giving forward guidance on future rate movements – a deliberate signal that the central bank wants markets to react to data, not comments from the Fed.
Hawks, dissent and what September might bring
All three discrepancies carry real weight on how Thursday’s data will be interpreted. Ian Lyngen, head of U.S. rates at BMO Capital Markets, believes the committee will hold its decision at least until September, when two more CPI figures will be available.
Vanguard senior economist Adam Schickling offered a contrarian view: A cooling labor market and the limited power of monetary policy against supply-driven inflation (think tariffs and energy shocks) make rate hikes difficult to implement, even if the data supports them. Aubrey Woessner of the Indeed Hiring Lab added that “the trajectory of prices, not the labor market, will determine the policy scenarios that prevail in the near term.”
In this context, Thursday’s GDP and PCE data are not just economic figures. This is the first offer in a debate that already began in September.
Geopolitical pressures embedded in the numbers
Market participants will analyze GDP data for possible imprints left by two specific forces: the ongoing conflict in the Middle East and the residual effects of Trump-era tariffs. Volatility in energy prices linked to tensions between the United States and Iran has already driven up oil prices. The GDP deflator, which reflects inflation of all domestically produced goods and services, including exports, is particularly sensitive to these dynamics.
At the same time, tariff effects are expected to manifest unevenly throughout the quarter. Whether Thursday’s numbers reflect a significant pass-through to consumer prices — or whether companies have absorbed the costs — is one of the subplots investors will read about.
The Atlanta Fed’s GDPNow real-time tracker, which uses hard data rather than surveys, sat at 1.6% as of July 27 – a notable deviation below the consensus of 2.1%. This divergence is not unusual from a historical perspective, but it introduces real uncertainty about whether the official BEA numbers are on the bullish or bearish side of expectations.
US Dollar Index and Technical Setup Ahead of Data
THE US Dollar Index It enters a constructive position on Thursday, trading at the upper end of its multi-month range, well above the 101.00 level. Momentum indicators support this trend: the RSI is near 63 and the average directional index (ADX) is just above 25, both suggesting that the recent uptrend has underlying strength rather than low-conviction drift.
Support and Resistance Levels to Watch
On the other hand, the first significant floor is the July low at 100.35set for July 14. Below, tentative support emerges from the 55-day and 100-day simple moving averages at 100.24 and 99.68, respectively. The most structurally significant level is the 200-day SMA near 99.10 – FXStreet technical analysts flag this as the line that separates a constructive outlook from a deteriorating one.
On the rise, the main resistance is located at cumulative cap of 101.80last tested on June 24. A rise in GDP that reinforces the US growth narrative could provide the catalyst needed to challenge this level.
A weaker-than-expected figure – particularly if paired with weaker PCE data – would raise questions about whether the Fed’s hold has been properly calibrated and could put near-term pressure on the dollar despite the broader technical setup.
Why this data release involves unusual issues
The analytical significance here goes beyond the typical quarterly data cycle. The Fed finds itself in a situation where three of its own members believe rates should already be higher, where geopolitical shocks are actively fueling inflation dynamics, and where Chairman Warsh has explicitly distanced the institution from his forward guidance. This makes the incoming data – particularly a full triple release of GDP, PCE and GDP deflator – more consequential than it would be in a stable political environment.
If Thursday’s figures are good in terms of growth and inflation, they do not only validate the economy. They sharpen the internal debate at the Fed as September approaches and could accelerate the timetable for the first hike under Warsh’s leadership. Christian Hoffmann of Thornburg Investment Management, speaking after Wednesday’s decision, made it clear: it was an “uncomfortable position”, not a confident one.
The bond market has already delivered its own verdict. The 10-year Treasury yield rose 5 basis points to 4.657% after Warsh’s news conference, while the 30-year bond yield rose more than 9 basis points to 5.193% — a signal that longer-term investors are pricing in persistent inflation, not imminent relief.
FAQs
When will the preliminary estimate of US GDP for the second quarter be released?
The US Bureau of Economic Analysis will release the preliminary estimate of second-quarter GDP on Thursday at 1:30 p.m. GMT.
What is the expected growth rate of US GDP in the second quarter?
Analysts expect second-quarter U.S. GDP to post annualized growth of around 2.1%, although the Atlanta Fed’s GDPNow model placed its real-time estimate at 1.6% as of July 27.
What inflation data will be released alongside the GDP report?
The Federal Reserve’s preferred inflation gauge, personal consumption expenditures (PCE) and the GDP price index – also known as the GDP deflator – will be released as part of the same report on Thursday.
How Could the US Dollar Index React to Upcoming Economic Data?
The US Dollar Index could be significantly influenced by any surprises in GDP or inflation figures. With the index currently trading near multi-month highs and momentum indicators signaling bullish conditions, a stronger-than-expected reading could push prices toward the year’s high at 101.80, while a failure could test support around the July low at 100.35.
Article produced with the help of artificial intelligence and reviewed by the editorial team.