US Dollar Drops Despite Encouraging US GDP Data. Forecast as of 24.12.2025 | LiteFinance
The revival of American exceptionalism in 2026 is the biggest threat to bullish forecasts for the EUR/USD pair. However, the impressive 4.3% growth in US GDP failed to help the US dollar. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- US GDP expanded 4.3% in the third quarter.
- The US economy is booming thanks to the wealthy.
- Donald Trump wants to lower interest rates.
- Long trades can be opened as long as the EUR/USD pair remains above 1.1795.
Weekly US Dollar Fundamental Forecast
The US dollar rose only slightly amid the acceleration of the US economy in the third quarter to 4.3%, the highest level in two years. The revival of American exceptionalism may cancel the bearish forecast for the greenback in 2026. However, its reaction to GDP data shows that panic is premature. Should EUR/USD bears give up hope?
US GDP Change
Source: Bloomberg.
Consumer spending continues to increase despite pessimism about the economy, dissatisfaction with high prices, and a cooling labor market. About 70% of GDP growth in the third quarter was driven by investment in AI and US consumer spending, especially among high-income households.
However, Donald Trump prefers to avoid going into detail. He announced that tariffs were the main driver of the US’s excellent economic performance. From now on, US GDP will only get better, and there will be no inflation at all. Furthermore, the new Fed chair will lower interest rates and help the stock market, rather than destroying it for no reason. Anyone who disagrees with this will not become the central bank’s head.
There are so many contradictions in the president’s statements that one cannot help but understand the reasons for mistrust of the US dollar. In a rapidly growing economy, there cannot be low inflation. A red-hot GDP is the main reason for the Fed to raise, not lower, interest rates. A strong economy means a strong currency, but Donald Trump wants to see a weaker dollar.
In trying to combine incompatible elements, the US administration is creating the ideal environment for US stock indices. This is the so-called Goldilocks scenario, where GDP is expanding rapidly, and the Fed intends to lower rates to help the cooling labor market at least. This regime is unfavorable for the greenback. Against this backdrop, it is poised to record its worst yearly performance since 2017, the first year of Donald Trump’s first presidential term.
US Dollar Performance
Source: Bloomberg.
According to the dollar smile theory, the USD index rises when the economy is performing well or, conversely, when it is struggling. The first scenario is associated with American exceptionalism, while the second stimulates demand for safe-haven assets. However, if the US GDP is indeed performing well, why would the Fed lower interest rates?
Weekly EURUSD Trading Plan
The sluggish reaction of the EUR/USD pair to US economic statistics is due to the prevailing greed in financial markets. When the S&P 500 index is hitting new highs, the US dollar is poised to decline. However, the Santa Claus rally will end at some point, and the greenback will likely recover. If the euro fails to stay above 1.1795, a pullback may occur. You can use it to build up long-term long positions, or you can take a risk and sell the euro in the short term.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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