**US Dollar Rises on Hawkish Fed Comments, Euro Slides Amid Growth Concerns**
*Author: Mitrade News Team, original article at mitrade.com/insights/news/live-news/article-1-1049245-20250819*
The US dollar continued its steady climb on global foreign exchange markets following fresh hawkish signals from Federal Reserve officials, while the euro slipped as investors weighed the risks of slowing growth in the eurozone and persistent inflation. The currency market’s focus this week has been on diverging central bank outlooks in the US and Europe as well as a raft of economic data that could shape monetary policy discussions in the months ahead.
**Fed Maintains Hawkish Tone**
Recent statements from top Federal Reserve policymakers have reinforced the prospect of higher-for-longer interest rates in the United States. The Fed’s approach follows last week’s US consumer inflation data, which came in hotter than expected and prompted a re-pricing of rate cut – and even rate hike – expectations in financial markets.
A summary of the latest Fed commentary:
– Several Fed officials stressed the need for patience before initiating any rate cuts, citing persistent inflationary pressures and resilient economic activity.
– Fed Governor Michelle Bowman said that the central bank’s job on inflation is not yet finished, and that it remains too soon to consider lowering rates.
– Minneapolis Fed President Neel Kashkari reiterated that inflation risks remain two-sided, but the Federal Reserve must remain “vigilant” and “nimble.”
– Cleveland Fed President Loretta Mester commented that while inflation is trending lower, it has not yet reached a point that justifies policy easing.
– The CME FedWatch Tool shows that traders now see only a modest probability of a rate cut at the upcoming September meeting, with further reductions priced in more tentatively for late 2024.
These signals have strengthened the US dollar’s standing as the highest-yielding major currency, drawing renewed interest from investors seeking relative safety and yield.
**Economic Data Supports Dollar Strength**
Key US macroeconomic indicators have largely supported the dollar’s advance. Market participants have digested several positive data points, which suggest the US economy is withstanding higher interest rates more robustly than initially feared.
Among the highlights:
– US retail sales for the latest month beat expectations, pointing to continued consumer resilience.
– The most recent jobs report, though showing a slight moderation in payroll growth, indicated steady wage gains and a still-tight labor market.
– The latest producer price index also reflected continued cost pressures, raising the odds that consumer inflation will endure at levels above the Fed’s target for longer.
In the meantime, safe-haven flows into US Treasuries have underscored the dollar’s role as the primary reserve currency during times of uncertainty.
**Euro Falls on Growth Headwinds and ECB Dovishness**
Against this backdrop, the euro has lost ground, falling to multi-week lows versus the dollar and other major currencies.
Key factors weighing on the euro include:
– Worries over stagnating growth in the eurozone, with Germany and France posting disappointing industrial production figures.
– Inflation in the euro area has moderated faster than in the US, giving the European Central Bank more leeway to consider policy easing.
– ECB policymakers have recently adopted a more dovish tone, hinting at the possibility of rate cuts as soon as the second quarter of this year.
– Market betting on ECB rate cuts has intensified, with futures implying multiple reductions by year-end.
The euro’s weakness is compounded by political risks, including uncertainties surrounding upcoming elections in several member states and fiscal stability concerns in southern Europe.
**Pound Struggles as BOE Signals “Wait and See”**
The British pound has also underperformed following dovish signals from the Bank of England, despite inflation in the UK remaining stubbornly above the BoE’s 2% target.
– The Bank of England opted to leave rates on hold at its last meeting and indicated it is watching both the inflation and growth data carefully.
Read more on GBP/USD trading.