Towards the end of the year, economic data production activity is seen to slow down as major central banks around the world begin to enter the Christmas and New Year holidays.
However, there is one data that remains the main focus of the currency market, namely the preliminary US GDP figures for the Third Quarter which are scheduled to be published at 9.30 pm tonight (Tuesday).
The publication of the data has been delayed due to the government shutdown, in addition to investors now assessing signs of weakness in the US labor market.
In addition to GDP, data such as durable goods orders, industrial production and consumer confidence are also expected to influence short-term sentiment towards the US dollar.
Market analysts expect US economic growth to moderate to 3.6%, compared to 3.8% in the previous reading.
If the published data shows a clear slowdown, it has the potential to reinforce expectations that the Federal Reserve will begin to ease monetary policy as early as the first quarter of next year, thus putting further pressure on the US dollar.
Conversely, if the preliminary GDP figures are released higher than expected, it could trigger a temporary strengthening reaction in the US dollar, as markets may re-price expectations of a Fed rate cut.
This scenario has the potential to push US bond yields higher and limit outflows from the USD in the short term, particularly in an environment of low market liquidity towards the end of the year.
