Precise Investors Editorial Team
The dollar index was at 100.72, set for a weekly drop of 0.24%
The dollar held steady on Friday but was set for a weekly decline as a tame U.S. inflation report this week led traders to cut bets on imminent rate hikes from the country’s central bank, although escalating attacks in the Middle East soured sentiment.
Iran and the U.S. exchanged intensifying fire in a week-long escalation that has largely unravelled last month’s truce, spurring safe haven bids for the dollar and leading oil prices near one-month highs.
The dollar index was at 100.72, set for a weekly drop of 0.24%.
The USD remains the highest-yielding safe-haven currency in the G10 complex, OCBC strategists said in a note.
Near-term FX price action is likely to continue reflecting the ‘USD smile’ framework, under which the greenback tends to outperform when markets price either stronger U.S. growth and higher rates or a rise in global risk aversion, they wrote.
Data on Thursday showed U.S. retail sales rose slightly in June as lower gasoline prices weighed on receipts at service stations, but online spending surged, prompting economists to upgrade their second-quarter growth estimates.
The country’s economic resilience was underscored by other data also showing labour market stability. Economists believe the central bank would keep interest rates unchanged later this month after data showed consumer price inflation had cooled in June.
Chances for a central bank hike in July stood at 11%, versus a 25% implied probability last week, according to the CME FedWatch tool. Traders are pricing in 26 basis points of hikes by December.
I don’t think July is live for rate hikes, said Tani Fukui, senior director of global economic and market strategy for MetLife Investment Management. We expect neither rate hikes nor cuts in 2026.
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