Yesterday's second estimate of US growth in the second quarter was 0.2 percentage points higher than expected. Real final sales to private domestic purchasers — a sum of consumer spending and gross fixed investments, and according to Jerome Powell, a better indicator of underlying growth trends — were even revised upwards by 0.7 percentage points, Commerzbank's FX analyst Michael Pfister notes.

Markets continue to observe the Fed turmoil with surprising indifference

"These figures must essentially be viewed alongside the weak figures from the first quarter, but the fact that the data does not indicate an imminent slump in growth is a good sign for the US dollar. Christopher Waller, a Fed Governor and one of the candidates to succeed Powell, probably had these figures in mind when he said last night that a 50-basis-point interest rate cut in September was not absolutely necessary. However, he left the door open by emphasising that this decision would depend on labour market data due next week."

"Inflation figures are also likely to argue against a cold start with a 50 basis point interest rate cut. For today's PCE deflator, our economists expect a month-on-month core rate of 0.3%, similar to the consensus, which is probably too high to justify a larger interest rate cut immediately. From this perspective, the downside potential for the US dollar is likely to remain limited for the time being, and the focus of the foreign exchange market is likely to remain on the ongoing turmoil surrounding the dismissal of Fed Governor Lisa Cook — even though the market continues to observe this turmoil with surprising indifference."