Dollar Strengthens, Euro Pressured by Surge in US Yields
The US dollar strengthened on Friday (July 24th), pushing the euro lower. The US Dollar Index held near its highest level in three weeks.
The dollar's strength was driven by rising US government bond yields and a surge in oil prices. The 10-year Treasury yield reached 4.7%, while the 30-year yield remained above 5%.
EUR/USD weakened after the dollar continued its rally following the European Central Bank meeting. The ECB maintained its benchmark interest rate and continued to adopt a data-driven approach at each meeting.
The divergence in monetary policy expectations between the United States and Europe is widening. The swap market now expects the Fed to almost certainly raise interest rates at its September meeting to curb inflationary pressures.
Inflationary pressures also increased after President Donald Trump's new tariffs took effect. The United States imposed tariffs of 10% to 12.5% on imports from 60 trading partners, while Brent oil remained above US$100 per barrel due to disruptions to shipping lanes in the Red Sea and Persian Gulf.
As long as bond yields, energy prices, and expectations of interest rate hikes remain high, the dollar has the potential to maintain its strength. The market will next be closely monitoring the meetings of the Fed, the Bank of Japan, China's Politburo, and China's manufacturing PMI data. (arl)
Source: Newsmaker.id
