Dollar heads for second weekly gain

The US dollar edged down to 98.5 on Friday but remained on track for its second consecutive weekly gain, as robust economic data continued to give the Federal Reserve space to delay monetary easing. The greenback has risen 0.6% so far this week, positioning it for its first back-to-back weekly advance since May, reflecting growing confidence in the underlying strength of the US economy.

On Thursday, data showed that retail sales rebounded more than expected in June, signaling continued consumer strength despite headwinds from tariffs and elevated borrowing costs. In a further sign of resilience, weekly jobless claims fell unexpectedly to a three-month low, suggesting the labor market remains tight and capable of withstanding policy and trade uncertainty. These stronger-than-expected indicators have prompted a recalibration in interest rate expectations, with markets scaling back the likelihood of imminent rate cuts.

Reflecting this shift, Fed Governor Adriana Kugler said it would be appropriate to keep rates steady “for some time,” emphasizing the importance of monitoring incoming data before adjusting policy.

Still, the Federal Reserve remains divided on its policy path. Governor Christopher Waller reiterated his support for a rate cut as early as this month, citing concerns about inflation returning too slowly to the Fed’s 2% target. Similarly, San Francisco Fed President Mary Daly maintained her projection for two rate cuts by the end of the year, underscoring the dovish voices still present within the central bank.

Meanwhile, political pressure on the Fed lingered in the background. President Donald Trump sought to reassure markets by stating that he had no intention of firing Fed Chair Jerome Powell, following earlier speculation that had unsettled investors. However, Trump continued to criticize Powell’s handling of monetary policy, accusing the Fed of being overly cautious with rate cuts despite what he described as a strong justification for more aggressive easing in the face of global trade challenges.

While the dollar pulled back slightly on Friday amid some profit-taking, its broader upward trend was supported by shifting rate expectations, stable economic performance, and a temporary easing of political uncertainty surrounding the Fed’s leadership. Traders are now turning their attention to next week’s economic releases—including the flash PMIs and updated inflation metrics—as well as any fresh commentary from Fed officials, which could provide further clarity on the central bank’s next move.