The world’s biggest economy grew more than expected in the third quarter, lifted by resilient consumer spending and soaring business investment, largely driven by the artificial intelligence buildout. Inflation-adjusted US gross domestic product increased an annualised 3.4% pace in the three months ending in September after rising 2.2% in the prior quarter, according to an initial estimate published by the Bureau of Economic Analysis. Forecasters surveyed by Bloomberg had, on average, expected the economy to grow at a 3.2% rate. Real final sales to private domestic purchasers—a widely-watched measure of underlying demand—advanced 4.9%, up from 4.6% in the previous quarter.

Household activity remained strong, with overall consumption rising at a satisfying 2.5% pace year over year, but the imprint of the technology boom was felt across much of the rest of the report. Business investment jumped 12.47%, lifted by a 14.1% lift in the equipment category, while residential investment fell -2.5%. Net trade subtracted 3.3 percentage points from the headline as import growth vastly outpaced exports, surging 10.3% as businesses imported information processing components and industrial equipment used in datacentres. Inventory growth contributed 1.6 percentage points.

Separately, the Federal Reserve’s preferred inflation measure accelerated slightly in September while personal income and spending missed expectations. Data also released by the Bureau showed the core personal consumption expenditures index rising 0.3% from the prior month — faster than the 0.2% pace recorded in August — and climbing 3.1% year on year, up from 3.0%. The headline index rose 0.5% on the month and 3.6% from a year ago, in line with consensus estimates. Personal income rose 0.2% and inflation-adjusted household spending flatlined, both missing forecasts of 0.3% and 0.1% respectively.

Front-end Treasury yields are inching lower and the dollar is holding steady as market participants welcome the positive headlines, but question the sustainability of the business investment boom and worry about a potential softening in consumer demand — leaving monetary tightening expectations essentially unchanged.

The data follow the Fed’s decision yesterday to leave interest rates unchanged, even as officials upgraded their assessment of the economy and hinted at further tightening. The statement described growth as “strong”, up from “solid” in September, with resilient domestic spending, robust capital investment, and rising productivity supporting a continued expansion. Policymakers acknowledged that inflation remains “elevated”, however, and suggested that gathering more information would help clarify next steps. Chair Warsh subtly signalled that borrowing costs remain in accommodative territory, noting that although overall financial conditions have tightened, he was “unwilling and unable” to describe them as tight.

This morning’s European Central Bank decision should be a non-event for currency markets. Policy rates will almost certainly stay on hold, there are no new forecasts due, and the statement should remain relatively non-committal, leaving a move implicitly on the table for the next meeting. Traders are putting 80% odds on a December hike, and have a total of three priced in by next autumn.

Turbulence could begin instead during the press conference half an hour later. After this morning’s confirmation that President Christine Lagarde will step down in February, nine months before her eight-year term expires, speculation surrounding the succession process may overshadow more substantive discussion. But questions about how fiscal stress in France is affecting the monetary policy outlook could move markets – particularly if Lagarde concedes that tighter euro area financial conditions are reducing the need for further rate hikes.

With speculators sitting on the biggest short position in a decade, we’re wary of further momentum-driven softness, but also alert to the risk of a short squeeze that drives the common currency higher. We will update you if there are any material developments.