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The dollar advanced on Friday, supported by higher Treasury yields and a combination of safe‑haven demand and continuing inflation concerns.
Crude supply disruptions due to the closure of the Strait of Hormuz continue to drive prices to the upside, pushing markets to reassess the timing of monetary policy easing and lean toward a more cautious sentiment.
Markets are now pricing only one interest rate cut by year-end, which could limit the downside risks for the dollar.
This week’s data showed that inflation remained relatively stable in February, but the focus could remain on the impact of oil prices. At the same time, low jobless claims and firmer ADP hiring underscore a resilient labour market, reducing the necessity for immediate interest rate cuts.
Looking ahead, all eyes are now on today’s key economic data, including GDP growth, PCE, JOLTs and durable goods orders, which could inject volatility into forex and bond markets. However, Middle Eastern tensions are likely to remain the main driver of the dollar. Any escalation is likely to bolster the dollar and yields further.
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