In the third quarter of 2025, the US GDP growth rate was revised to 4.4%, up from the initial estimate of 4.3%, as reported by the US Bureau of Economic Analysis. This change happened due to increased exports and investments, though it was partly offset by a drop in consumer spending. The economic update didn’t significantly impact the market. At that time, the US Dollar Index decreased by 0.15%, reaching 98.65.

Understanding GDP

GDP measures how much a country’s economy has grown over time, often compared to previous quarters. It’s usually shown as an annualized figure, which means it assumes the current quarter’s growth rate will continue for the entire year. GDP affects currency by indicating a nation’s economic health; higher GDP usually strengthens a country’s currency. It often leads to increased spending and may prompt the central bank to raise interest rates to control inflation, further boosting the currency’s value. An increase in GDP can also have a negative impact on gold prices. When interest rates rise, so does the opportunity cost of holding gold compared to interest-earning investments, which can lower gold prices. Looking back at the strong 4.4% GDP growth for the third quarter of 2025, we see it as a peak in that economic cycle. The details showed an increase in investments but a decrease in consumer spending, providing an important early sign. Now, with the initial estimate for fourth-quarter growth at a more modest 2.5%, it’s evident that the economic momentum has slowed.

Shifts In Economic Expectations

The Federal Reserve responded to the strong growth in 2025 with a final interest rate increase in December, but new data has shifted expectations. The December 2025 report revealed core inflation slowing to 3.1% and job growth halting at 160,000, confirming a cooling economic trend. As a result, interest rate futures show almost no chance of another hike, and the market is now focusing on possible rate cuts later this year. This change in rate expectations is influencing currency markets. The US Dollar Index was below 99.00 when the Q3 data was released last year, rose toward 103.00 by December, but has since slipped back to about 101.50. We believe options strategies that profit from a steady or slowly declining dollar may be wise in the coming weeks. In the second half of 2025, gold prices faced significant pressure as real interest rates increased, similar to what occurred during the aggressive rate hikes of 2022. Now that the market believes rates have peaked, the cost of holding non-yielding assets like gold is decreasing. This shift could stabilize gold prices, making call options or call spreads an interesting strategy if the economy weakens further. Create your live VT Markets account and start trading now.

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