By Daniel Takieddine, Co-founder and CEO, Sky Links Capital Group
The US dollar was relatively stable on Friday, trading close to a one-month high and positioning for a weekly gain that reverses the prior week’s decline. The move has been reinforced by a broad rise in treasury yields during the last few days, reflecting stronger labor data and Federal Reserve minutes that highlighted a committee still debating the appropriate pace of policy adjustment.
Weekly jobless claims fell to a five-week low, signaling continued labor market tightness, while the Philadelphia Fed’s business outlook index surprised to the upside, reaching its strongest level in several months. These indicators suggest that economic momentum remains intact, underpinning higher yields.
However, the near-term trajectory now hinges on today’s PCE inflation release, alongside preliminary GDP and S&P PMI readings. The PCE is expected to remain steady to some extent, but any renewed disinflation could revive expectations of a more accommodative Fed, weighing on both yields and the dollar. Conversely, confirmation of resilient growth and persistent price pressures would likely sustain upward pressure on yields and extend the currency’s gains. Currently, markets continue to price two rate cuts this year.