The US dollar index recorded a significant increase at the end of the week, approaching its fourth consecutive weekly rise, supported by expectations that the Federal Reserve will keep interest rates elevated longer than anticipated, alongside growing optimism regarding the performance of the US economy.
The index rose by 0.35% to reach 106.16 points, benefiting from a series of positive statements and supporting economic data. Below are the key factors influencing its performance today:
US Interest Rate Expectations Support Dollar Strength The dollar received a strong boost after comments from Federal Reserve member Rafael Bostic, who indicated that he expects only one interest rate cut this year. Bostic explained that the US economy could grow between 0.5% and 1% during 2025, ruling out any recession at present. He also warned that inflationary pressures resulting from tariffs between the US and China could pose a future challenge for policymakers, significantly supporting the dollar.
Optimism About the US Economy Boosts Dollar Gains Additionally, the dollar benefited from the prevailing optimism regarding the US economy, as Barclays bank positively adjusted its economic forecasts, now excluding the possibility of the economy slipping into recession this year. The bank raised its GDP growth forecast to 0.5% for 2025, compared to previous estimates that indicated a contraction of 0.3%. It also revised its forecast for economic growth in 2026 to 1.6%, from 1.5% in its previous estimates, which bolstered the dollar's movements in the markets.
Pressure from Declining US Bond Yields Despite strong support from interest rate expectations and economic data, the dollar faced some pressure from declining yields on bonds. The yield on 10-year bonds fell by 0.34% to 4.440%, while the yield on 20-year bonds decreased by 0.28% to 4.929%, and the yield on 30-year bonds dropped by 0.35% to 4.902%.
Outlook for the Dollar Index As next week approaches, investors are looking forward to the release of more US economic data that could be crucial in determining the dollar's direction in the near term, in addition to comments from Federal Reserve members that may signal future monetary policy decisions.
