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Investors interpreted these developments as potentially supportive for global trade flows and the broader U.S. economic outlook, giving the dollar additional upward momentum.
Rate Cut Bets Support Greenback’s Rally
Beyond trade developments, the dollar’s resilience is also underpinned by growing expectations that the Federal Reserve may begin cutting interest rates as early as June. Markets are now pricing in 100 basis points of easing by year-end.
This dovish shift follows a string of softer-than-expected economic data. First-quarter U.S. GDP contracted 0.3%, marking the first decline in three years. Meanwhile, the ADP employment report showed private-sector job gains of just 62,000, signaling potential softness in the labor market.
Additionally, the Core PCE Price Index cooled to 2.6% year-over-year, down from 3%, providing the Fed with more flexibility to ease policy.
Focus Shifts to Economic Releases
Looking ahead, markets are closely watching Thursday’s ISM Manufacturing PMI and Weekly Jobless Claims, followed by the April Nonfarm Payrolls report on Friday.
These releases could provide clarity on whether the Fed’s next move will confirm the market’s expectations—and whether the dollar’s uptrend has more room to run.
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