USD Faces Headwinds as Atlanta Fed GDPNow Slips to 3.6% for Q4

The Atlanta Fed's GDPNow model has trimmed its Q4 GDP growth estimate to 3.6% from 3.7%, continuing a steady decline from the widely publicized 5%+ readings that were inflated by government shutdown-affected data. Today's modest downward revision followed releases of industrial production, housing starts, and durable goods orders data. The gradual erosion of GDP expectations could weigh on the US dollar as markets reassess the strength of the US economy heading into the first official GDP reading. Tomorrow's GDPNow update could trigger more significant moves, with critical trade balance and wholesale inventories data potentially producing larger forecast swings. For USD pairs, the softening growth outlook may temper hawkish Federal Reserve expectations, creating modest downside pressure on the greenback. Traders should monitor the DXY index for signs of broader dollar weakness, particularly around key support levels. Near-term, EUR/USD and GBP/USD may find upward momentum if GDP expectations continue to deteriorate, while USD/JPY could test lower ranges as yield differentials narrow on softer US economic projections.