The US Dollar Index (DXY) has extended its gains, reaching near 104.30 in Friday’s European session. This surge comes after a significant recovery from a recent four-month low of 103.65. The dollar’s appeal has been boosted by increasing speculation of a Republican victory in the upcoming US presidential elections.
The assassination attempt on Donald Trump and rumors of President Joe Biden’s potential withdrawal from the race due to health concerns have fueled this speculation. Trump’s advocacy for tight trade policies, which tend to strengthen the dollar, has further contributed to the greenback’s rise.
Additionally, the 10-year US Treasury yields have recovered to near 4.21%. However, the broader outlook for the US Dollar and bond yields remains uncertain due to expectations that the Federal Reserve (Fed) may start cutting interest rates as early as September.
Cooling inflation and a softening labor market have led to increased bets on a Fed rate cut. Market data suggests that traders are already pricing in rate cuts in both September and November or December.
Investors are now eagerly awaiting speeches from Fed officials John Williams and Raphael Bostic on Friday, hoping for clues about the likelihood of two rate cuts in the coming months.