Dollar Rallies on Solid US Economic News and Soaring Crude Prices

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Summary · why it matters

The dollar index rose 0.26% on Thursday, supported by favorable US economic data and a Financial Times report that Fed Chair Warsh is willing to raise interest rates at the September FOMC meeting if inflation firms and market expectations shift further towards tightening in the coming months. Weekly initial jobless claims increased by 1,000 to 199,000, below the 205,000 estimate, while second-quarter nonfarm productivity rose 1.4%, exceeding the 0.6% forecast, and unit labor costs gained 1.3%, less than the 2.1% expectation. The dollar also drew strength from a more than 2% jump in WTI crude oil prices, which lifted inflation expectations and reinforced hawkish Fed policy bets. The euro fell from a seven-week high, pressured by an unexpected 0.3% monthly drop in Eurozone June retail sales and the rise in oil prices, though losses were limited by a stronger-than-expected 3.1% monthly increase in German June factory orders. The yen weakened as higher crude prices and rising Treasury yields weighed on Japan’s import-dependent economy, even as Treasury Secretary Bessent said the US would not hesitate to repeat forex market intervention to support the yen if needed. Gold and silver settled lower, with gold retreating from a seven-week high and silver from a one-month high, as a stronger dollar, higher oil-driven inflation expectations, and the Financial Times report on potential Fed tightening pressured precious metals.

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