USD Set for Weekly Gain as Rate Cut Speculation Declines

<ul>
  <li>The dollar is poised for its largest weekly rise in a month and a half, driven by robust U.S. economic data and a hawkish stance from the Federal Reserve.</li>
  <li>The Australian dollar has dropped 1.3% to $0.6605, while the New Zealand dollar is down 0.6% to $0.6098.</li>
  <li>"Traders pushed out the timing of the first Fed rate cut to December," said Westpac economist Jameson Coombs.</li>
</ul>
<p><strong>Dollar Set for Weekly Gain Amid Strong U.S. Economic Data and Hawkish Fed</strong></p>

<h2><strong>U.S. Economic Indicators Boost Dollar</strong></h2>
<p>Recent U.S. economic indicators have shown surprising strength, propelling the dollar to its largest weekly gain in over a month. Business activity in May accelerated to its highest level in just over two years, with manufacturers reporting a surge in input prices. This has led to a reassessment of U.S. interest rate cut expectations, pushing the anticipated timing of the first Federal Reserve rate cut to December.</p>

<h3><strong>Impact on Global Currencies</strong></h3>
<p>The strength of the U.S. dollar has exerted significant pressure on other global currencies. The Australian dollar has fallen by 1.3% to $0.6605, and the New Zealand dollar is down 0.6% to $0.6098. The euro has also weakened, trading at $1.0814 in the Asian markets, down 0.5% for the week. The yen has not been spared either, weakening by 0.8% to 157.10 per dollar.</p>

<h2><strong>Federal Reserve's Hawkish Stance</strong></h2>
<p>Minutes from the Federal Reserve's April 30-May 1 meeting revealed a live debate among policymakers about whether current rates are sufficiently restrictive to curb inflation. This hawkish tone has surprised investors who were expecting rate cuts, further bolstering the dollar's strength. The U.S. dollar index, which measures the dollar against a basket of six major peers, has risen nearly 0.6% for the week to 105.07, marking its largest one-week rise since mid-April.</p>

<h3><strong>European Currency Movements</strong></h3>
<p>The euro received a minor boost on Thursday when a key European wage indicator picked up, showing a 4.7% rise in negotiated wages last quarter. This development has ruffled market bets on a June rate cut for Europe, helping lift the euro away from a nine-month low against the pound. However, the European Central Bank published a blog post highlighting one-off factors contributing to the wage rise, and rates markets still price a near 90% chance of a rate cut next month.</p>

<h3><strong>Conclusion</strong></h3>
<p>The dollar's robust performance this week underscores the impact of strong U.S. economic data and a hawkish Federal Reserve. As global currencies adjust to these developments, market participants will be closely watching upcoming economic indicators and central bank communications for further clues on future monetary policy directions.</p>