Dollar Strengthens as Robust Economic Data Delays Fed Rate Cuts

The dollar extended its weekly rally as stronger-than-expected U.S. economic data pushed back expectations for Federal Reserve rate cuts. June retail sales outperformed analyst forecasts, while unemployment claims dropped to a three-month low, reinforcing the view that the Fed can maintain higher rates for longer.

The dollar index held steady at 98.456, poised for a 0.64% weekly gain after a 0.91% rise the previous week. It briefly touched 98.951 on Thursday—its highest level since June 23—as inflation concerns resurfaced following a five-month peak in consumer prices, partly attributed to recent tariff hikes.

Market expectations for rate cuts have diminished, with traders now pricing in less than 0.5% in easing by December. Despite recent gains, the dollar remains 9.3% below its year-to-date high, weighed down by earlier trade policy uncertainties and fiscal stability concerns.