U.S. Economy Strong: ADP, GDP, PCE Beat Forecasts — Markets Expect Delayed Fed Cuts

TradingKey - Today’s batch of U.S. economic data delivered a strong dose of confidence to markets, with most key indicators surpassing expectations — signaling no signs of meaningful weakness. The data has significantly boosted market confidence that the Federal Reserve will hold rates steady and delay any near-term rate cuts.

Key Data Highlights:

• ADP came in strong, far exceeding expectations. The forecast was for 75,000 new jobs, but the actual print was 104,000, underscoring robust labor market momentum and aligning with the Fed’s goal of stable employment.
• Real GDP growth, adjusted for inflation, advanced at a 3% annualized rate in the second quarter — not only reversing Q1’s -0.5% contraction but significantly surpassing the expected 2.6% gain.
• The Core PCE Price Index, the Fed’s preferred inflation gauge, rose 2.5% year-over-year, above the 2.3% forecast. This indicates persistent, albeit moderate, inflationary pressure, further weakening the case for rate cuts this year.
• However, pending home sales fell 0.8% month-over-month, missing the flat forecast and down from a 1.8% increase previously. This highlights continued softness in the housing market amid elevated interest rates — a key reason why President Trump has repeatedly called for rate cuts, arguing that many American families are struggling to afford homes under current conditions.

Market Reaction:

Following the data release, the U.S. Dollar Index extended its gains, spot gold declined further, and silver dropped over 1.6%. U.S. Treasury yields rose, reflecting rising expectations that tighter monetary policy will persist.

Meanwhile, Trump’s renewed public calls for “immediate rate cuts” were interpreted by markets as an attempt to apply political pressure — especially now that the economy appears strong.

Some analysts suggest that Trump is concerned that the Fed may lose momentum on rate cuts if it sees the economy as too robust. His public statements, therefore, appear aimed at counterbalancing the data and keeping downward pressure on interest rates.