**U.S. Dollar Extends Gains Amid Fed Comments and Economic Data: Weekly Forex Market Analysis**
*Original source: mitrade.com | Author: Mitrade News Team*
The U.S. dollar continued its bullish trajectory throughout the past week, buoyed by robust economic data and a series of hawkish remarks from Federal Reserve policymakers. In contrast, most major currencies including the euro, pound, Japanese yen, and Australian dollar experienced sustained pressure, driven by both domestic economic concerns and divergent monetary policy expectations.
This article delves into the primary drivers of the U.S. dollar’s growing strength, outlook for upcoming central bank decisions, and key economic indicators traders should closely track.
## Key Highlights of the Week:
– The U.S. Dollar Index (DXY) surged past the 105 mark, reaching a new multi-week high due to strong U.S. retail sales and persistent inflation worries.
– Federal Reserve policymakers made fresh comments suggesting one or no rate cuts for 2024, challenging market expectations.
– The Japanese Yen plummeted toward 160 against the dollar again, prompting speculation about another possible Bank of Japan (BoJ) intervention.
– The euro came under pressure following dovish signals from the European Central Bank (ECB) and lackluster manufacturing data.
– The British pound weakened, partly after softer-than-expected economic figures and mixed signals from the Bank of England.
– The Australian dollar fell as employment data missed expectations and as risk sentiment remained fragile amid tensions in China.
Let’s take a detailed look into each of the leading forex pairs and what impacted them last week:
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## U.S. Dollar (USD): Fed Stance, Data Keep Greenback Buoyant
The U.S. dollar remains the favored currency in the forex universe, backed by sturdy economic indicators and clarity from policymakers.
### Supporting Factors:
– **Retail Sales Data:**
– U.S. retail sales rose 0.7 percent in June, higher than expected.
– The robust consumer spending countered fears that an economic slowdown might be near.
– **Sticky Inflation:**
– While headline Consumer Price Index (CPI) for June showed some softening, core inflation remains elevated.
– Services inflation, in particular, continued to show strong price growth, worrying Fed officials.
– **Fed Policymaker Comments:**
– New York Fed President John Williams said rate cuts weren’t imminent and depended on further progress in inflation.
– Fed Governor Christopher Waller hinted that only one rate cut (if any) might be on the table for 2024.
– **US Treasury Yields:**
– Yields rose steadily throughout the week, supporting the dollar.
– The 10-year Treasury yield reclaimed the 4.3 percent level, signaling confidence in economic resilience.
### Market Reaction:
– U.S. Dollar Index (DXY) moved decisively above 105.
– Traders repriced rate cut expectations, now seeing lower probability of a September cut.
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## Euro (EUR): Weak Under Pressure, Dovish ECB Outlook Weighs
The euro lost ground against the dollar amid fading hopes for a hawkish European Central Bank and weak economic readings.
### Key Developments:
– **ECB Meeting Minutes:**
– The latest minutes revealed a cautious stance, indicating more confidence that inflation would return to target without further hikes.
– **EZ Economic Data:**
– Germany’s ZEW Economic Sentiment Index slipped more than expected.
– Manufacturing activity across the Eurozone remains in contraction territory, with the June PMI at only 45.8.
– **Political Risks:**
– Investors remain wary of rising political uncertainty in countries like France and Italy, which is dampening capital flows into Europe.
### EUR/USD Outlook:
– EUR/USD dropped below 1.0850 by week’s end.
– Analysts now forecast continued downside unless ECB rhetoric turns more hawkish or U.S. data shows sharp deterioration.
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## British Pound
Read more on USD/CAD trading.