US GDP Grows 2.2% In Q2 As Core PCE Inflation Cools

(MENAFN- Daily Forex) United States GDP for the second quarter of 2026 posted a third and final estimate that was much higher than expected, with a 2.2% gain, compared to 1.5% in the second estimate. The strong gain was driven by upward revisions to investment, consumer spending and government spending. The data indicates that the US economy is more robust than anticipated and even surpassed the first quarter growth figure of 2.1%.

Top Regulated Brokers1 Get Started 74% of retail CFD accounts lose money Inflation Eases but Still Above Target

Alongside the GDP report, the Core PCE Price Index, which excludes food and energy and considered the Federal Reserve's preferred inflation indicator, rose 3.0% year-on-year in August, matching the July figure which was revised downward from 3.3%. Importantly, the Core PCE Price Index came in lower than the market estimate of 3.3%. On a monthly basis, core PCE ticked higher to 0.2%, up from a revised 0.1% in July but less than the market estimate of 0.3%.

The Fed's inflation target of 2% remains well below actual inflation levels, which could necessitate further rate hikes before the end of the year. On Tuesday, Fed Governor Michael Barr said Tuesday that the combination of the war with Iran and tariffs meant that the Fed had been“knocked off course on our progress toward our 2% goal.” The Fed raised rates by a quarter-point earlier this month, its first hike since July 2023

High oil prices won't help the Fed in its battle against inflation, as crude is selling around $103 per barrel. There isn't much optimism about a quick end to the conflict - US President Trump said on Tuesday that he has no intention of easing sanctions on Iran, and last week Trump warned that he may renew strikes against Iran after the mid-term elections in November. Investors remain jittery about the Persian Gulf conflict and high crude prices, and weak risk sentiment could continue to boost the safe haven US Dollar Reaction – U.S. Dollar Slightly Lower, Stock Market Higher

In the forex market, the U.S. dollar is showing slight losses against most of the major currencies on Wednesday, in the aftermath of the GDP and PCE releases. The EUR/USD currency pair is up 0.11%, trading at 1.1135 and USD/JPY has declined 0.32%, trading at 1.5676. GBP/USD is showing the strongest movement, up 0.40% and trading at 1.3286.

The U.S. stock market showing gains in early trading:

The S&P 500 Inde is up 31.50 points (0.41%) at 7,702.34.

The Nasdaq 100 Index is up 136.42 points (0.45%) at 30,475.74.

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