Dollar holds firm as strong data reinforces higher-for-longer expectations

The US dollar remained firm near multi-week highs as resilient domestic economic data and ongoing uncertainty around US-Iran negotiations supported demand for safe-haven assets. Diplomatic efforts faced constraints tied to disagreements over Tehran’s uranium stockpile and the future of the Strait of Hormuz, sustaining the currency’s support. Economic releases reinforced expectations for a cautious Federal Reserve approach and strengthened the higher-for-longer interest-rate narrative. While rates were still forecast to remain unchanged this year, a later hike remained possible if inflationary pressures persisted, supporting Treasury yields and the dollar. Labor market indicators showed underlying resilience, with jobless claims stable and below expectations for continuing claims. Manufacturing activity accelerated to its strongest level in several years, while services moderated slightly but stayed in expansion territory. Focus shifted to the Michigan Consumer Sentiment Index, where resilient confidence would likely bolster yields and the dollar.

"The US dollar held firm on Friday, remaining close to multi-week highs as resilient domestic data and persistent uncertainty surrounding US-Iran negotiations continued to support the currency."

"Diplomatic efforts remain constrained by disagreements over Tehran's uranium stockpile and the future of the Strait of Hormuz, keeping the safe-haven demand for the dollar intact."

"Recent economic releases have reinforced the expectations for a cautious approach from the Federal Reserve and strengthened the broader higher-for-longer narrative. While forecasts still point to rates staying unchanged this year, a hike remains a possibility later on, particularly if inflationary pressures persist, which would provide a constructive backdrop for both Treasury yields and the dollar."

"Labour market data continued to point toward underlying resilience. Initial jobless claims remained stable at relatively low levels, while continuing claims stayed below expectations. Business activity also showed continued strength, with manufacturing activity accelerating to its strongest level in several years. Although service activity moderated slightly, the sector remained in expansion territory, suggesting that overall economic momentum remains solid."

Read at London Business News | Londonlovesbusiness.com