Upcoming US Economic Data: What It Means for Currency Markets and Your Investments
SINGAPORE – The US dollar remained steady on Thursday as traders assessed the likelihood of a cautious Federal Reserve easing cycle following a reserved tone from policymakers. Market participants are also awaiting key economic data that could shed light on the effects of tariffs and the future trajectory of interest rates.
Currently, traders have factored in 43 basis points of rate cuts over the remaining two Fed meetings this year. However, statements from officials, including Federal Reserve Chair Jerome Powell, suggest that decisions will heavily depend on forthcoming economic data. This uncertainty has led traders to temper expectations for a rate cut as soon as next month. Despite this, the dollar has inched higher since the Fed’s recent rate reduction, which occurred as anticipated.
The euro was trading at $1.1752, up 0.12% in early Asian trading after falling 0.6% the previous day. Sterling stood at $1.3464, following a similar 0.6% decline on Wednesday. The dollar index, which tracks the US currency against six major counterparts, eased slightly to 97.744 but remained near its highest point since September 11, reached overnight. The index is poised to close the month with a gain, despite the greenback’s nearly 10% decline against major currencies so far in 2025.
Vasu Menon, managing director of investment strategy at OCBC Bank, highlighted concerns that stronger-than-expected US economic growth could reduce the number of Fed rate cuts priced in for 2026. “This has led to some degree of caution in the short term,” he noted. San Francisco Fed President Mary Daly echoed the cautious sentiment, acknowledging the need for further rate cuts but emphasizing that the timing is uncertain. “Will they come right now, this year or going forward? It’s hard to say,” Daly stated, underscoring the Fed’s dual mandate to balance its economic objectives.
Attention now turns to upcoming US economic releases, including the Personal Consumption Expenditures (PCE) report on Friday, the Fed’s preferred inflation measure, and the final estimate for second-quarter GDP on Thursday. These come amid growing concerns over a potential government shutdown.
Investors are also closely monitoring the impact of extensive tariffs implemented by US President Donald Trump. Laura Cooper, global investment strategist at Nuveen, described tariff-driven price pressures as a “wild card.” She expects PCE inflation to peak near 3.2% later this year, a projection that supports the Fed’s data-driven approach and calls for continued patience.
In currency markets, the Japanese yen strengthened following the release of minutes from the Bank of Japan’s July policy meeting, which revealed that some board members advocated resuming interest rate hikes. The yen traded at 148.62 per US dollar, retreating from a three-week low hit on Wednesday. Traders assign roughly a 50% probability to a rate hike at the BOJ’s October 29-30 meeting.
The Swiss franc remained steady at 0.7948 per US dollar ahead of its own policy meeting later in the day. Meanwhile, the New Zealand dollar climbed 0.31% to $0.5825, rising from a one-month low touched on Wednesday.
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The cautious tone from the US Federal Reserve and uncertainty over future rate cuts underscore volatile currency conditions that Oman’s importers and exporters must closely monitor. Businesses should brace for potential fluctuations in trade costs and global capital flows, while smart investors should consider متنوعسازی پرتفویها to hedge against currency risks amid the evolving US economic outlook.
