United States GDP for the fourth quarter of 2025 was revised downward to 0.5% year-on-year in the third and final estimate. This was revised lower from 0.7% in the second estimate and 1.4% in the preliminary reading, according to the latest figures from the Bureau of Economic Analysis (BEA), much lower than the GDP gain in the third quarter of 3.3%.
The weak gain in the third GDP estimate was mainly due to a downward revision in investment. Consumer spending continues to be a soft spot and slowed to 1.9%, which was more than expected. As well, exports declined by 3.2%, the sharpest contraction since Q2 2023. According to the BEA, the U.S. economy expanded by a lukewarm 2.1% in 2025.
Core PCE Indicates Inflation is Steady
Alongside the GDP report, the Core PCE Price Index, considered the Federal Reserve’s preferred inflation indicator, was unchanged in February at 3.0% year-on-year. On a monthly basis, core PCE ticked higher to 0.4%, up from 0.3%. With inflation remaining steady, the Federal Reserve is unlikely to cut rates, which would have put pressure on the U.S. dollar.
U.S. President Trump’s see-saw tariff policy has been overshadowed by the war with Iran. The conflict has led to soaring oil prices, which have fallen back below $100 per barrel this week following the ceasefire between the U.S. and Iran. However, it is questionable whether the ceasefire will hold, and the latest reports indicate that Iran has yet to allow free access in the vital Strait of Hormuz, through which about 20% of the world’s oil passes, which could send oil prices higher.
The continuing uncertainty over the Middle East crisis has boosted the U.S. dollar in recent weeks against some assets, such as the Japanese yen and gold, but most of the major currencies have held their own against the greenback. With developments unfolding daily in the Gulf, it is difficult to predict where the U.S. dollar is headed. If the ceasefire holds and the Strait of Hormuz is reopened, risk appetite should improve, which would be bearish for the U.S. dollar. Conversely, an escalation in the war would likely give a boost to the safe-haven U.S. currency.
Market Reaction – U.S. Dollar Muted, Stock Market Calm
In the Forex market, the U.S. dollar is showing slight gains against the major currencies in the aftermath of the GDP release. EUR/USD is down 0.22% and GBP/USD has eased 0.20%.
The U.S. stock market showed marginal losses in early trading on Thursday.
The S&P 500 Index was down 7.41 points (0.11%) at 6,775.15.
The Nasdaq 100 Index was down 16.54 points (0.06%) at 22,618.46.
We hope you enjoyed reading our analysis of the latest high-impact US economic data. If you’d like to trade with one of the best Forex brokers in the world, check out our list.