US Dollar Index Rises to 98.50 Ahead of Retail Sales and Fed Rate Decision

US Dollar Index Rises to 98.50 Ahead of Retail Sales and Fed Rate Decision

The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against a basket of six major global currencies, rose sharply in early Thursday’s Asian session, reaching around 98.50. This move comes ahead of the US Retail Sales data for June, set to be released later today, alongside the Initial Jobless Claims and the Philadelphia Fed Manufacturing Index.

Fed Expected to Hold Rates Steady in July

The US Dollar's strength is driven by increased market expectations that the Federal Reserve (Fed) will keep interest rates unchanged at its upcoming July policy meeting, maintaining the benchmark range of 4.25%–4.50%. This expectation follows stronger-than-expected US inflation data, which suggests that while inflation remains above the Fed's target, it may not yet warrant further tightening.

The US Consumer Price Index (CPI) rose 2.7% year-on-year in June, aligning with forecasts. Although the core CPI slowed to 2.9%, just below the expected 3.0%, it still remains well above the Fed’s 2% target.

Additionally, the US Producer Price Index (PPI) data released Wednesday revealed no monthly change in June, with the core PPI rising by 2.6% YoY, indicating subdued upstream price pressures.

Trump Tariff Talk Adds Caution to the Market

Meanwhile, US President Donald Trump announced that he would send a single letter to over 150 countries, notifying them of a proposed 10% tariff. He also hinted that tariffs could increase to 15% or 20%, though no confirmation was provided. These trade policy developments may influence market risk sentiment and could indirectly affect the Fed’s rate strategy moving forward.

What’s Next for the US Dollar?

Traders will closely watch the upcoming US Retail Sales figures, which could validate or challenge current Fed rate expectations. A strong reading could further support the USD, while a weak number may renew calls for rate cuts.

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