US Dollar Climbs against Major Counterparts on Strong Economic Growth

The US dollar climbed against most of its major peers on Wednesday, as investors became more optimistic in the wake of strong economic data. Fresh reports showing firm economic growth in the second quarter and solid job gains this month sent an index that tracks the greenback to the highest level since Friday.

The Bureau of Economic Analysis stated in a report that was released this afternoon that its second estimate for gross domestic product pointed to a 3.0% growth in the second quarter of 2017. The bureau’s first estimate showed a 2.6% gain, while analysts expected the second estimate to show a 2.7% growth.

The strong economic performance in the second quarter followed a much slower 1.2% growth in the first quarter, which fitted the pattern of economic growth in the past three years. The gain in the second quarter was the highest since 2014, which was in a large part due to higher consumer spending and business investment.

The report added that the Federal Reserve’s preferred index for inflation decelerated in the second quarter to 1.6% from 2.0% in the previous quarter. The central bank maintains its annual inflation target at 2%, which raised some concerns that the Federal Open Market Committee may delay the next interest rate hike.

The CME Group FedWatch tool, which tracks prices of federal funds futures to calculate investors’ bets on future interest rates, showed a 30.9% chance of a rate increase in December.

However, the US dollar remained strong today after getting more support from a report that was released by the ADP Research Institute. The report said that the private sector hired 237,000 employees this month, which was a lot more than expectations of a 185,000 job gain.

The gain was also the biggest since April following a 201,000 increase in July. Large firms hired 115,000 more employees, while midsized businesses created 74,000 new positions. Small firms also contributed to job gains with 48,000 new workers. 204,000 of the new jobs were in the service sector.

The official labor data from the Bureau of Labor Statistics is due to be released on Friday. Analysts expect the data to show an increase of 180,000 following a 209,000 increase last month.

EUR/USD traded at 1.1904 as of 16:55 GMT on Wednesday after dropping to 1.1895 at 14:40 GMT, the pair’s weakest level since August 25. EUR/USD began trading today at 1.1968.

The Dollar Index, which tracks the performance of the US currency against a basket of its major counterparts, rose to 92.79 as of 16:49 GMT today, from 92.24 yesterday. The index touched 92.85 at 14:40 GMT today, the highest level since August 25.

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