Dollar Holds Firm as Markets Eye U.S. Spending Data and Fed Rate Path Amid New Tariffs

The U.S. dollar held steady near multi-week highs on Friday as stronger-than-expected economic data dampened expectations for further monetary easing by the Federal Reserve. Investors are closely watching upcoming U.S. consumer spending figures for clues about the Fed’s next move, while new tariffs announced by President Donald Trump added another layer of uncertainty to global markets.

The dollar index, which tracks the greenback against a basket of major currencies, climbed 0.6% in the previous session after upbeat reports on U.S. GDP growth, unemployment claims, durable goods orders, and wholesale inventories. It was last trading at 98.473, close to a three-week high and on pace for a 0.8% gain for the week. Analysts say the data has prompted traders to scale back bets on near-term interest rate cuts.

Against the yen, the dollar remained flat at 149.81 after briefly testing the 150 mark—its highest level since early August. The euro hovered at $1.1665 following a 0.6% slide on Thursday. Market pricing now indicates an 87.7% chance of a 25-basis-point rate cut in October, down from earlier forecasts of over 90%, reflecting shifting expectations for Fed policy.

Revised figures from the Commerce Department showed U.S. gross domestic product grew at an annualized 3.8% from April through June, well above the initially reported 3.3%. Economists also anticipate that Friday’s personal consumption expenditures (PCE) price index—the Fed’s preferred inflation gauge—will show a 0.3% monthly increase in August and a 2.7% rise year-on-year, potentially reinforcing the case for a slower pace of rate cuts.

Globally, central banks are grappling with divergent pressures. In Japan, core inflation in Tokyo remained above the Bank of Japan’s 2% target, bolstering expectations of a near-term interest rate hike. Meanwhile, President Trump’s announcement of new tariffs—including 100% duties on branded drugs and steep levies on trucks and kitchen cabinets—has reignited trade tensions just as earlier deals were starting to ease investor concerns.

source: cnbc