By Konstantinos Chrysikos, Head of Customer Relationship Management at Kudotrade
The dollar paused near one-week highs after advancing in the previous session, supported by a renewed rise in treasury yields across the curve. The strength in yields reflects a repricing of monetary policy expectations, providing a firmer foundation for the currency.
Recent US data have reinforced the narrative of economic resilience. Industrial production surprised to the upside, durable goods orders signaled sustained business investment momentum, and housing indicators pointed to continued demand. Together, these data releases challenge the view that monetary policy is weighing on activity.
The latest Federal Reserve minutes added a further cautious undertone. While no immediate hike is expected, several policymakers acknowledged that rates could move higher again should inflation stall or reaccelerate. That conditional tightening bias prompted markets to scale back expectations of interest rate easing, with pricing now centred on two rate cuts this year.
Looking ahead, attention shifts to today’s weekly jobless claims, followed by PCE inflation and GDP data on Friday. Confirmation of economic strength and resilient price pressures would likely sustain upward pressure on yields and extend dollar support. Conversely, softer readings could quickly reopen the easing debate and weigh on both.