US Dollar Defies Expectations: Strong US Data Sparks Discussions on Monetary Policy Measures

The US dollar maintained its strong gains on Friday after unexpectedly positive economic data from the US dampened hopes for further easing by the Federal Reserve this year. The dollar index, which measures the performance of the greenback against major currencies, rose 0.6% in the previous session. The surprisingly good figures on US economic development, jobless claims, durable goods, and wholesale inventories exceeded expectations. Meanwhile, the yen hit an eight-week low after US President Donald Trump announced a new round of tariffs. Attention is now focused on the Friday release of US consumer behavior data, which could provide clues about how urgently the US economy needs additional stimulus from the Fed. Gavin Friend, a senior market strategist at National Australia Bank, commented: "Looking at yesterday’s figures, the question arises: Where's the urgency?" The dollar index remained stable at 98.473, near a three-week high, and is heading for a weekly gain of 0.8%. The greenback was nearly unchanged at 149.81 yen, edging back towards the 150 mark it last breached in early August. The euro traded at 1.1665 US dollars after a 0.6% decline on Thursday. Markets are now pricing in an 87.7% chance of a 25 basis point rate cut by the Fed in October, down from the previous 90%-92%. According to the Commerce Department, the US gross domestic product from April to June was revised up by 3.8%, higher than the previously reported 3.3%. Economists surveyed by Reuters had not anticipated such a revision. The personal consumption expenditures (PCE) index expected on Friday, the Fed's preferred inflation measure, is forecasted to show an increase of 0.3% from the previous month and 2.7% from the previous year for August. Bansi Madhavani, a senior economist at ANZ, stated: "Given the concerns among Fed members about heightened inflation, we think such a report could be encouraging." In Tokyo, where the central bank is pursuing a tightening cycle, September data shows core inflation well above the central bank’s 2% target, underpinning the expectation of an imminent rate hike. Simultaneously, Trump announced a broad range of new import tariffs, including 100% on branded drugs, 25% on heavy trucks, and 50% on kitchen cabinets, just as the first positive signals emerged from bilateral trade talks.