Weekly Analysis

The dollar fell sharply after U.S. retail sales dropped 0.9%, far below expectations, signaling weaker consumer spending. While CPI and PPI exceeded forecasts, cooling PPI components reinforced the Fed’s cautious stance on rate cuts. The euro climbed toward $1.05, supported by weak U.S. retail sales and rate-cut expectations, while the British pound hit $1.2585 after Trump delayed tariffs, easing trade tensions. The Bank of England cut rates to 4.5% and lowered its 2025 growth forecast to 0.

The dollar index fell after weak jobs data, raising doubts about Fed policy. Treasury Secretary Bessent reaffirmed support for a strong dollar and denied Trump is pressuring the Fed for cuts. Markets still expect two 25bps cuts this year. The euro rose above $1.04 as Trump’s tariffs and China’s retaliation fueled uncertainty. The ECB cut rates and may ease further, with markets expecting the deposit rate to drop to 1.87% by December. The pound ended higher despite the BoE’s 25bps cut, with traders pricing in three more cuts this year.

The U.S. dollar index rebounded, supported by solid GDP growth, the Fed’s hawkish stance, and Trump’s 25% tariffs on Mexico and Canada. The EUR/USD declined on expectations of an ECB rate cut, while GBP/USD slipped amid a strong dollar and anticipated BoE easing. The yen strengthened to 154 per dollar as BoJ rate hike bets grew.

The dollar index fell as Trump’s policies eased inflation concerns, with no mention of China tariffs at the World Economic Forum. The euro rose to $1.05, supported by a weaker dollar, improving Eurozone PMIs, and expected ECB rate cuts. The yen strengthened as the BoJ raised rates to 0.5%, its highest in 16 years, with core inflation hitting 3% and potential further hikes ahead.

The dollar index dropped 0.8% last week, breaking a six-week winning streak. Despite strong US data, hopes for Fed rate cuts rose due to weaker inflation, PPI, and retail sales. The euro gained as European inflation aligned with forecasts, Germany’s data exceeded expectations, and ECB hawkishness supported the currency.

The US Dollar Index ended the week higher, bolstered by hawkish FOMC minutes and inflation data. Despite positive PMI data and inflation figures supporting a less aggressive ECB stance, the euro weakened against the stronger dollar. The pound also fell, pressured by rising yields and capital outflows linked to inflation and fiscal instability.

The dollar index rose to 109.4, its highest since October 2022, driven by strong U.S. growth expectations, elevated rates, and Trump’s pro-growth policies. The euro fell to $1.0220, weakened by Europe’s weak outlook and a dovish ECB, while the pound dropped on UK economic stagnation and BoE rate cut signals.

The Dollar Index rose slightly as 2025 rate cut expectations dropped to 35 basis points. EUR/USD fell on Lagarde's dovish remarks, while GBP/USD declined due to BoE rate cut votes and weak Q3 GDP. The yen weakened as mixed data and BoJ caution on rate hikes outweighed higher Tokyo inflation.