The U.S. dollar index (DXY) rose by +0.04% on Friday, recovering from a six-week low, driven by stronger U.S. economic indicators and higher Treasury yields. Key economic data included a +0.9% increase in the Q2 employment cost index, above the anticipated +0.8%, and a rise in the July MNI Chicago PMI to 57.6 from an expected decline to 56.0. The University of Michigan’s consumer sentiment index was revised upward to 55.2, a five-month high, surpassing forecasts of a drop to 54.0.
Dallas Fed President Lorie Logan indicated that without policy action, inflation could remain above target, supporting expectations of a +25 basis point rate hike at the next FOMC meeting on September 15-16, with a 67% probability implied by market pricing. Meanwhile, the euro slightly increased by +0.03% on improvements in France’s CPI, while the German unemployment rate unexpectedly rose to 6.4% from 6.3%.
The Japanese yen fell by -0.26% as speculation grew regarding potential U.S. intervention to support the currency, following Treasury Secretary Bessent’s comments on its undervaluation. The Bank of Japan (BOJ) kept interest rates unchanged at 1.00%, while projections for Japan’s GDP were slightly raised. The BOJ’s decisions come amid mixed data, including a +1.3% increase in June industrial production but a significant -4.1% drop in retail sales.
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