**US Dollar Weekly Outlook: Questioning the Likelihood of a Deep, Sustained Sell-Off**
*Based on the original article by Yohay Elam at FXStreet, with supplemental information provided.*
—
The US dollar (USD) stands at a crucial juncture in the forex market as traders reexamine their expectations regarding the Federal Reserve’s future policy, potential recessionary risks, and the impact of US data releases. The USD Index, which measures the greenback against a basket of major currencies, recently experienced fluctuations, but calls for a deep and lasting sell-off remain uncertain. This article explores the factors influencing the USD’s near-term direction, the outlook for key currency pairs, and broader economic dynamics shaping the dollar’s trajectory.
### Market Recap: Mixed Performance and Shifting Sentiment
– The US dollar started the week with a risk-averse bid, driven by renewed concerns about the US economy’s resilience and the potential delay in Fed rate cuts.
– As the week progressed, risk appetite improved, catalyzed by softer US labor market data and moderating inflationary readings.
– The release of the ISM Manufacturing and Services PMIs offered mixed signals about the durability of US economic momentum.
– By week’s end, traders pared expectations for aggressive Fed rate cuts, ultimately supporting the dollar and limiting downside momentum.
– The USD Index held near the 104.00–105.00 range, demonstrating the dollar’s resilience despite persistent volatility in financial markets.
### Core Drivers of the US Dollar’s Outlook
#### Federal Reserve Policy Expectations
– Market sentiment surrounding Fed policy remains the foremost driver of USD moves.
– At the June Federal Open Market Committee (FOMC) meeting, the Fed signaled just one rate cut in 2024, down from prior projections for three cuts.
– Recent Fed commentary has emphasized a “data-dependent” approach. Policymakers remain cautious, citing the need for “greater confidence” that inflation is moving sustainably toward the 2 percent target before easing.
– Stubbornly high inflation metrics earlier this year forced investors to recalibrate expectations. The Consumer Price Index (CPI), while moderating, has not shown a straight path down.
– Consequently, the USD has weathered periodic bouts of weakness when soft data emerges but recovers quickly when Fed officials stress caution or when risk-off sentiment takes hold.
#### US Macroeconomic Data
– The labor market added fewer new jobs in the most recent payroll report, yet the unemployment rate remained relatively low.
– Wage growth decelerated marginally, which suggests a cooling, but not collapsing, jobs market.
– The ISM manufacturing sector rebounded into expansionary territory, while services payrolls indicated a broader economic slowdown.
– Retail sales and consumer confidence are closely monitored. Recent spending data showed resilience, but consumer expectations remain under scrutiny due to sticky inflation and high borrowing costs.
– These data releases have introduced two-sided risks for the greenback. Disappointing numbers foster speculation about earlier
Read more on AUD/USD trading.