The dollar remained broadly stable on Friday as markets digested trade headlines and anticipated next week’s Federal Reserve meeting.
A key factor supporting the currency is positive trading developments. Reports suggested that US and EU negotiators are close to striking a deal that would impose a 15% baseline tariff on most European goods, echoing terms already agreed with Japan.
The prospect of a negotiated outcome helped ease some uncertainty, with talks with China also scheduled to resume in Stockholm next week. This backdrop reduced immediate downside risks for the dollar.
On the monetary policy front, the Fed is widely expected to keep rates unchanged next week. However, the spotlight is on Chair Powell’s post-meeting remarks, which may offer clues on the outlook. Markets currently price in 2 rate cuts by year-end, with cuts projected for September and December.
Treasury yields continued to rise to a certain extent as interest rate cut expectations receded. Better-than-expected jobless claims supported the cautious stance of the Fed. Yields could react to any developments on trade agreements and expectations of monetary policy. While a dovish stance could pressure the yields and the dollar, a more cautious tone could provide support.
