US GDP forecasts rise to 2.5% for Q3, but elevated Treasury yields and fiscal deficits cap dollar gains despite resilient economic data.
The US dollar has extended its recent decline, approaching key support levels despite upgraded Q3 GDP growth forecasts to 2.5% annualized from 2.0%. Elevated long-end Treasury yields and concerns over fiscal deficits are weighing on sentiment, limiting the currency’s upside momentum.
Speculative positioning data still show a modest net long USD bias, but price action suggests fading momentum. Markets are focusing on policy implications of efforts to manage rising yields, alongside longer-term risks tied to fiscal sustainability.
While US economic resilience remains a supportive factor, the dollar’s struggle to rally reflects broader uncertainty. Investors are assessing whether negative risk premiums could emerge amid persistent yield pressures and trade policy shifts.