Dollar Holds Tiny Retreat, Eyes Big Weekly Rally
The U.S. dollar bit back a whisper, slipping a few points, but it’s still lounging near a two‑year high—ready to rock the strongest weekly move in over a month. Traders are bracing for a potentially tighter Federal Reserve in 2025, which could keep the greenback humming.
What’s Driving the Greenback?
- Solid Jobs: Jobless claims are dropping, showing the labor market is keeping its mojo.
- Smooth Growth: U.S. economic expansion stays steady, making aggressive rate cuts feel less urgent.
- Yield Resiliency: Treasury yields held above 4.5% on the 10‑year note after a three‑month rally.
With both Trump’s inauguration and the Fed’s rate‑setting deadline looming, yields may get a bit bumpy. Inflation fears and a hawkish outlook could keep the dollar’s pigeon‑eyes on the prize.
Key Watchlist Items
- ISM Manufacturing PMI: Expect a narrowing contraction. If the numbers stumble lower, the Fed might lean into easing the economy, giving the dollar a pause on its climb.
- Eurozone PMIs (next week): A slowdown could nudge European Central Bank policies to prolong cuts, possibly bolstering the dollar further.
Bottom line: The greenback is riding high, but it’s still a tightrope walk—a dance between robust stats and the looming heat of policy tightening.
