US Dollar Gains as Economic Data Coincides with Ongoing Trump-Xi Summit

US Dollar Rises as Economic Data Supports Steady Fed Policy Outlook

New York, - The US dollar climbed for a fourth consecutive day on Thursday, driven by a string of positive economic data releases that continued to shift market expectations away from a potential rate cut from the Federal Reserve. The dollar index, which measures the greenback against a basket of currencies, rose 0.37% to 98.83.

According to the Commerce Department, retail sales rose 0.5% in April, matching the estimate of economists polled by Reuters. This increase followed a downwardly revised 1.6% jump in March. The steady growth in retail sales suggests that American consumers remain confident in their spending habits, despite expressing caution to pollsters.

The Labor Department reported that weekly initial jobless claims rose by 12,000 to a seasonally adjusted 211,000, slightly above the 205,000 estimate. This indicates that the job market remains stable and supports the notion that the US economy is resilient in the face of various challenges.

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Import prices increased 1.9% in April, well above the 1.0% estimate, with the cost of fuels posting the largest increase in four years. This rise in import prices is consistent with the brisk increases in consumer and producer inflation data released earlier in the week.

The dollar's strength was further fueled by comments from Federal Reserve officials highlighting inflation risks and the need for caution in monetary policy. Kansas City Federal Reserve President Jeffrey Schmid noted that inflation is the biggest risk to the US economy, which has shown "remarkable resilience" in the face of numerous challenges. Federal Reserve Governor Stephen Miran, who has repeatedly advocated for rate cuts, announced that he would resign his seat on or shortly before Kevin Warsh is sworn in as the Fed's next chair.

Economic Data Comparison

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The dollar's gains were tempered by the ongoing tensions between the US and China, as well as the situation in the Strait of Hormuz. The Iran war continues to drag on, keeping oil prices elevated, and recent comments from Fed officials have flagged inflation concerns. Expectations for a hike in 2027 have slowly increased, with 36.9% of market participants now anticipating a 25 basis point increase at the Fed's December meeting, up from 22.5% a week ago.

The dollar was flat at 6.786 versus the offshore Chinese yuan, while it strengthened 0.22% to 158.19 against the Japanese yen. The British pound weakened 0.94% to $1.3395, its biggest daily percentage drop since September 2, as turmoil envelops the UK government.