US Economy Experiences Unexpected Surge in Growth

The dollar strengthened against major currencies after a report showed that the US economy grew at a faster-than-expected pace in the fourth quarter of 2023, beating forecasts for growth. The National Bureau of Economic Research (NBER) released its final assessment of the economy’s performance, confirming a 2.8% annualized expansion in Q4, surpassing the consensus estimate of 2.5%. The stronger-than-expected reading led to an increase in Treasury yields, making US bonds less attractive to investors seeking higher returns. As a result, the dollar gained ground against the euro and the yen, while also strengthening against the British pound. The better-than-expected news was seen as a sign of resilience in the US economy despite concerns about inflation and interest rates. The National Income Account (NIA) reported that personal income rose by 4.1% year-over-year in Q4, driven by stronger wage growth and increased government benefits. Meanwhile, the US trade deficit narrowed to $576 billion in Q4, a decrease of $3.6 billion from the previous quarter. The decline was attributed to lower imports and increased exports. The improved economic data led investors to shift their bets towards riskier assets, driving up shares of growth-oriented companies and pushing bond yields higher.