The dollar retreated on Thursday, pausing its recent advance after a series of gains. The dollar could see some correction after its rebound. At the same time, it could continue to find support in strong economic data and the cautious stance of the Fed.
Despite some internal dissent, the central bank held interest rates unchanged as expected. Chair Powell reiterated that the Fed remains data-dependent and warned it was too soon to discuss easing. Markets responded by trimming expectations for rate cuts this year, now pricing in only one rate cut by year-end.
Long-term Treasury yields remained relatively stable as the Fed omitted any guidance on potential cuts. Yields could stay put if market participants continue to expect the Fed to hold rates for longer.
On the macro front, recent data surprised to the upside, with GDP growth exceeding forecasts. Looking ahead, focus will shift to today’s PCE inflation, followed by Friday’s jobs report. The releases could affect anticipations around a potential September move. Weaker-than-expected data could weigh both on the dollar and yields.