The dollar index hovered around 106.8 on Friday, poised for its strongest weekly gain in over a month, as investors scaled back expectations for Federal Reserve rate cuts.
Dollar up after Powell speech
On Thursday, Fed Chair Jerome Powell indicated no urgency to reduce rates, citing a resilient economy, strong labor market, and persistent inflation pressures. This led markets to sharply lower the probability of a quarter-point rate cut in December, with odds dropping to around 59% from 82.5% the previous day. Additionally, data revealed a slight uptick in US producer prices for October, with core PPI surpassing forecasts, further supporting the dollar.
Trump also boosted the greenback
The greenback also gained momentum on speculation that a potential Trump administration, alongside a Republican-controlled Congress, would pursue inflationary policies that could constrain the Fed's ability to ease borrowing costs. Expectations of increased deficit spending are pushing up Treasury yields, adding more support to the dollar's rally.
