Investing.com – The US dollar slipped back Friday, but remained on track for a strong weekly performance, boosted by expectations of a US economic outperformance and thus fewer Federal Reserve rate cuts this year.
The Dollar Index, which tracks the greenback against a basket of six other currencies, was last down 0.3% lower to 108.900, retreating after reaching a more than two-year high on Thursday.
Dollar remains strong
The index is on course for weekly gains of around 1%, which would be its best weekly performance in over a month, as traders continue to factor in a more hawkish Fed and a resilient US economy.
Manufacturing activity data in the US for December, as determined by S&P Global, came in stronger than expected on Thursday, setting the scene for the more widely-watched Institute for Supply Management’s version due later in the session.
This is seen cooling slightly to 48.2 last month, down from a five-month high of 48.4 in November. It was the eighth consecutive month that the measure was below the 50-point threshold, although the number remained above a level of 42.5 that the ISM says indicates broader economic expansion.
Markets will also be looking ahead to the important monthly jobs report at the end of next week, with the next Fed meeting also due this month.
“Markets are fully expecting a hold in January,” said analysts at ING, in a note. “If indeed the dot plot works as a benchmark for rate expectations for the next three months, the bar for a data surprise to seriously threaten the dollar’s big rate advantage is set higher.”
