Dollar Rises for Second Week on Resilient Economic Data

The U.S. dollar is poised to notch its second consecutive weekly gain, buoyed by stronger-than-expected macroeconomic figures that have kept investor sentiment bullish. Despite ongoing speculation surrounding the Federal Reserve’s next policy moves, the greenback continues to benefit from the resilience of the U.S. economy, outperforming most of its G10 peers in recent trading sessions.

Backed by positive data releases across retail sales, employment, and inflation expectations, the dollar index (DXY) rose nearly 0.6% this week, closing in on four-week highs and signaling renewed appetite for U.S. assets.

Economic Strength Offsets Rate Cut Concerns

Several economic prints released throughout the week helped solidify the dollar’s momentum:

• Retail sales for June surprised to the upside, suggesting strong consumer spending despite higher borrowing costs.

• Initial jobless claims came in below expectations, reinforcing labor market tightness.

• University of Michigan’s consumer sentiment index showed increased optimism and stable inflation expectations.

These data points have tempered fears of an imminent economic slowdown, even as the Fed maintains a cautious stance on future rate cuts. Traders now see a September rate cut as likely, but the trajectory remains dependent on incoming inflation and labor market trends.

Fed Signals vs. Market Expectations

While Fed officials have hinted that rate reductions could begin later this year, the timing remains contentious. The Federal Open Market Committee (FOMC) minutes released this week showed a split view among policymakers, with some concerned that premature easing could reaccelerate inflation.

Nevertheless, markets continue to price in two 25 basis point rate cuts by the end of 2025 — a scenario that has not significantly dented the dollar’s strength. On the contrary, the perception of U.S. economic outperformance compared to other advanced economies has underpinned demand for the greenback.

Global Currency Market Reactions

• The euro dipped below 1.0840, pressured by weak industrial data out of Germany and dovish rhetoric from ECB members.

• The Japanese yen hovered near a 38-year low against the dollar, reigniting concerns of potential intervention by the Bank of Japan.

• The British pound also weakened slightly amid disappointing wage growth figures, adding to uncertainty around Bank of England policy direction.

Emerging market currencies, particularly in Asia and Latin America, faced headwinds as U.S. yields remained elevated, reducing the appeal of riskier FX plays.

What’s Next for the Dollar?

With the dollar now entering a technical uptrend, attention shifts to next week’s data releases, including:

• Core PCE inflation report

• Second-quarter GDP estimate

• Durable goods orders

These will likely serve as key signals for the Fed’s rate decision at the upcoming Jackson Hole Symposium in August. A continued streak of positive data could delay rate cuts — potentially pushing the dollar even higher.

ForexFlash Insight

While the market remains fixated on the “when” of Fed easing, the “why” may be just as important. If data continues to defy recession fears, the Fed will have a harder time justifying aggressive policy loosening — and the dollar may extend its gains further into Q3.

Investors should watch the interplay between macro fundamentals and central bank communication closely. The greenback is showing strength not just as a safe-haven, but as a reflection of real economic superiority in an otherwise fragile global economy.