USD Surges as Q3 GDP Beats at 4.3% but Inflation Concerns Rise

The US dollar strengthened across major pairs following the release of stronger-than-expected Q3 GDP data at 4.3% versus 3.3% forecast. The robust growth was accompanied by concerning inflation metrics, with the GDP deflator jumping to 3.7% from 2.1% previously, significantly above the 2.7% estimate. Core PCE inflation held steady at 2.9%, while consumer spending accelerated to 3.5% from 2.5% in the prior quarter. The data presents a complex picture for Federal Reserve policy, as strong growth supports higher rates but elevated inflation readings may complicate the central bank's path forward. Dollar index gained 0.5% following the release, with EUR/USD dropping to test 1.0780 support levels. The combination of robust growth and sticky inflation suggests the Fed may maintain its hawkish stance longer than anticipated, providing continued support for USD strength in the near term.