The U.S. dollar edged slightly lower on Friday but remained on track to post another weekly gain, supported by stronger-than-expected economic data that reduced expectations for early interest rate cuts by the Federal Reserve.
At 04:05 ET (09:05 GMT), the Dollar Index—which measures the greenback against a basket of six major currencies—was down 0.1% at 99.095. Despite the modest dip, the index was heading for a weekly increase of around 0.2%, marking its third consecutive weekly advance.
Dollar supported by resilient U.S. data
This week’s dollar strength has been underpinned by a series of upbeat U.S. economic indicators. Notably, initial jobless claims fell unexpectedly to 198,000 last week, well below the 215,000 forecast, underscoring the continued resilience of the U.S. labor market.
Such data has reinforced market expectations that the Federal Reserve will keep interest rates higher for longer. As a result, traders have pushed back projections for the first rate cut toward the middle of the year.
Analysts at ING noted that the dollar’s recent performance reflects a broader macroeconomic trend. They pointed to firmer U.S. data, including retail sales and jobless claims, as well as the Fed’s Beige Book, which described a gradually expanding economy with no immediate risks to employment.
Additional comments from Federal Reserve officials also contributed to the cautious market tone. Austan Goolsbee emphasized that, given the stability in the labor market, policymakers should remain focused on bringing inflation down. Meanwhile, Jeff Schmid described inflation as still “too hot,” while Mary Daly said incoming U.S. economic data appears encouraging.
With little on the economic calendar for the rest of the day, ING added that there was no immediate reason to challenge the dollar’s gentle upward bias.
Euro edges higher
In Europe, EUR/USD ticked up to 1.1613 after data showed German consumer prices were unchanged in December, rising 1.8% year-on-year. This figure remains below the European Central Bank’s 2.0% medium-term inflation target.
The ECB has kept interest rates unchanged since concluding a rapid rate-cut cycle in June and indicated last month that it is in no rush to adjust policy again. The central bank has cited stronger-than-expected economic growth and easing inflation pressures as reasons for its cautious stance.
ING suggested that with a quiet eurozone data calendar, EUR/USD could drift toward the 1.1555–1.1565 area without major catalysts. Elsewhere in Europe, GBP/USD edged 0.1% higher to 1.3392.
Yen rebounds modestly
In Asia, USD/JPY fell 0.3% to 158.19, as the yen recovered slightly from near 18-month lows. The move was supported by verbal intervention from Japanese officials seeking to curb excessive weakness in the currency.
Japan’s finance minister warned that authorities would not rule out any measures to address yen depreciation, including the possibility of coordinated action with the United States.
ING cautioned that USD/JPY could remain volatile in the coming month, adding that current one-month volatility levels still do not appear particularly elevated.
Elsewhere, USD/CNY rose 0.1% to 6.9681, AUD/USD gained 0.1% to 0.6704, and NZD/USD advanced 0.3% to 0.5760.
