The U.S. dollar held steady Friday, following a sharp advance the previous session, as markets awaited the Federal Reserve’s preferred measure of inflation.
At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against six major currencies, slipped 0.1% to 98.090 after posting a 0.6% gain on Thursday. The index is on track to record a 0.8% weekly rise, its largest since the week ending August 1.
Investors Focus on PCE Data
Thursday’s dollar rally came after stronger-than-expected U.S. economic figures bolstered confidence in the resilience of the world’s largest economy despite elevated borrowing costs, limiting expectations for aggressive Fed easing.
Revised Commerce Department data showed U.S. GDP growth in the second quarter at an annualized 3.8%, up from 3.3%, driven by strong consumer spending and a narrower trade deficit. Weekly initial jobless claims fell to 218,000 from 232,000, below the one-year moving average of 227,000.
“The dollar hadn’t had such a slew of good data in a while, and positioning squeezes likely helped the move,” said analysts at ING, in a note. “But we think more good news is needed to keep the dollar going, and we see substantial risks of a correction today after a USD rally that looks slightly overdone.”
All eyes now turn to the Fed’s personal consumption expenditures price index (PCE), which will offer more clues on the future direction of U.S. interest rates.
“We expect 0.2% MoM, in line with expectations. That could be enough to bring the pricing for December Fed easing back into the 40-45bp area (now 39bp),” ING added.
Euro and Other Currencies
EUR/USD ticked up 0.1% to 1.1673, trading in a narrow band.
“Our baseline view is for the dollar to give back some gains, and we think a return above 1.170 can happen as early as today,” ING noted.
Traders are also processing U.S. President Donald Trump’s announcement of a wide range of new import tariffs, including 100% on branded pharmaceuticals, 25% on heavy trucks, and 50% on kitchen cabinets.
GBP/USD was largely unchanged at 1.3348, while USD/CHF stayed flat at 0.7999 after the Swiss National Bank left its key rate at zero, marking the first hold in seven meetings since its March 2024 rate cuts.
Asia-Pacific Markets
USD/JPY edged down to 149.83 but remains on track for a weekly gain above 1%, following Tokyo consumer data showing headline CPI up 2.5% YoY in September, unchanged from August, while core CPI eased to 2.5% from 3.0%. Analysts expect the Bank of Japan to continue its gradual policy normalization.
USD/CNY traded flat at 7.1345, while AUD/USD dipped 0.1% to 0.6531, on course for a nearly 1% weekly decline.
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