USD Records Volatile Week as Traders React to Data

Hani Abuagla, Senior Market Analyst at XTB MENA. Please don’t hesitate to get in touch if you require any further information.

The dollar index remained stable on Friday after a volatile week. On Thursday, the greenback experienced a slight setback, tumbling 0.4% as US retail sales fell more than expected in January. At the same time, initial jobless claims unexpectedly dropped to 212K, below market expectations, indicating resilience in the labor market. Both data points affected monetary policy expectations after Tuesday’s CPI figures battered early interest rate cut expectations.

Federal Reserve’s members added to the uncertainty regarding the direction of monetary policy and the dollar’s performance. Atlanta Fed President Raphael Bostic indicated this week that, despite progress in combating inflation, he was not ready to advocate for interest rate cuts due to ongoing risks. Conversely, Chicago Fed President Austan Goolsbee adopted a softer stance, suggesting that the central bank should be careful not to wait too long before implementing rate cuts.

As a result, the USD could continue to see some volatility as monetary policy expectations continue to shift with new data releases and Fed comments. While traders continue to see a cut in June, attention could turn to today’s PPI data as well as upcoming releases for new hints.