The US dollar index pared earlier losses to trade flat around the 100.8 mark on Friday, as cautious optimism and shifting rate expectations balanced out broader market jitters. Despite the subdued intraday movement, the greenback remains on course to notch a weekly gain of approximately 0.6%, extending its recent strength.
Dollar cuts losses on Friday
This would mark the dollar’s fourth consecutive weekly advance against the euro, reflecting diverging economic outlooks and policy trajectories between the US and the Eurozone.
Investor sentiment improved modestly amid growing hopes of a de-escalation in US-China trade tensions, following reports that both sides agreed to temporarily reduce certain tariffs, easing immediate concerns over a flare-up in the trade dispute. Simultaneously, a string of largely disappointing US economic data has bolstered expectations that the Federal Reserve will have sufficient flexibility to cut interest rates, potentially twice, in the second half of the year.
Recent data has painted a mixed but generally weaker picture of the US economy. Housing starts and building permits both undershot forecasts, signaling persistent headwinds in the real estate sector. Meanwhile, export and import prices registered unexpected gains, hinting at some lingering price pressures despite easing inflation elsewhere. Earlier in the week, both consumer price index (CPI) and producer price index (PPI) figures came in softer than anticipated, and retail sales growth also disappointed, reinforcing the market’s belief that the Fed will lean toward a more accommodative stance to support growth.
Safe-haven demand boosts dollar
In currency markets, the dollar's resilience is also being underpinned by safe-haven demand, with lingering geopolitical uncertainties—including the ongoing conflict in Eastern Europe and concerns over global growth—continuing to attract flows into the greenback. The euro, meanwhile, remains under pressure amid weak economic performance in the Eurozone, rising political risks, and expectations that the European Central Bank will maintain a dovish posture relative to its US counterpart.
Looking ahead, investors will closely monitor upcoming Fed commentary and next week's release of the latest meeting minutes for further clarity on the central bank's rate path, as well as any new developments in global trade negotiations that could further influence currency markets.
