FX.co ★ Dollar Holds Near 2-Month High on Fed Caution

The US dollar index remained close to 99.8 on Thursday, nearing a two-month peak, as the Federal Reserve maintained its interest rates at 4.25%–4.5%, in alignment with forecasts. Federal Reserve Chair Jerome Powell emphasized that it is premature to begin contemplating rate cuts and provided limited insight regarding the timing of any potential policy easing. In response to his comments, market participants adjusted their expectations for rate reductions this year, now anticipating a modest reduction of just 35 basis points by December. This sentiment shift coincides with robust US economic data, with both GDP growth and private employment figures surpassing predictions. Focus has now shifted to the release of PCE inflation data and jobless claims on Thursday, followed by the July employment report on Friday. In terms of trade policy, the US has finalized a tariff agreement with South Korea, while President Trump has enacted significant new tariffs on Brazil and India. The dollar index is on track to achieve a rise of approximately 3% for July, marking its first monthly advance of the year.