US Dollar Heads for Weekly Gains
The US dollar index moved steadily around 101.5 in trading on Friday (June 26). Despite pressure in the previous session, the greenback remains on track for weekly gains as the market continues to expect the Federal Reserve to raise interest rates this year.
On Thursday, the US dollar weakened after the latest Personal Consumption Expenditures (PCE) inflation report was released, generally in line with market expectations. This data eased some concerns that price pressures in the United States would rise more sharply than expected.
However, inflation remains well above the Federal Reserve's 2% target. This condition has led the market to believe that the Fed has not yet fully relaxed its policy stance. Expectations for an interest rate hike remain a major factor supporting the US dollar throughout this week.
The market currently estimates an approximately 80% chance that the Fed will raise interest rates in December, after the US central bank previously held rates on hold with a hawkish policy tone. Meanwhile, the probability of a rate hike in September is around 63%.
New York Fed President John Williams also stated that inflationary pressures are likely to ease this year, but remain at uncomfortable levels. This statement reinforces the view that the Fed will remain cautious before changing its monetary policy direction.
Under these conditions, the US dollar still has the potential to maintain its strength in the short term. As long as inflation remains high and the market is still pricing in the possibility of interest rate hikes, the greenback is likely to remain supported, especially against other major currencies. (asd)*
Source: Newsmaker.id
