The dollar was buoyed on Friday by a run of better-than-expected economic data, a more hawkish Federal Reserve outlook, and tensions between the U.S. and Iran.<\/p>\n
Phil Ashley | Getty Images<\/p>\n
The dollar was poised on Friday to cap its strongest weekly performance since October, buoyed by a run of better-than-expected economic data, a more hawkish Federal Reserve<\/a> outlook and as tensions between the U.S. and Iran kept markets on edge.<\/p>\n Overnight, the greenback got an added lift after\u00a0data\u00a0showed the number of Americans filing new applications for unemployment benefits fell more than expected last week, underscoring labor market stability.<\/p>\n It clung to gains in early Asia trade on Friday and left sterling<\/a>\u00a0languishing near a one-month low at $1.3457. It was headed for a weekly drop of nearly 1.5%.<\/p>\n The euro<\/a>\u00a0was similarly down a touch 0.02% at $1.1768 and set to lose 0.8% for the week, with the common currency also weighed down by\u00a0uncertainty\u00a0over European Central Bank President Christine Lagarde’s tenure.<\/p>\n Against a basket of currencies, the dollar<\/a>\u00a0hovered near Thursday’s one-month peak and was last at 97.89. It was on track for a weekly gain of more than 1%, which would mark its strongest performance in more than four months.<\/p>\n “It wouldn’t surprise me if the U.S. dollar keeps lifting for a while longer,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia, citing hawkishness from this week’s\u00a0Fed minutes\u00a0which showed several policymakers were open to rate hikes if inflation proved sticky.<\/p>\n Concerns about a U.S.-Iran conflict have also lent the dollar some safe-haven support this week.<\/p>\n U.S. President Donald Trump\u00a0warned\u00a0Iran on Thursday it must make a deal over its nuclear program or “really bad things” will happen, and set a deadline of 10 to 15 days, drawing a threat from Tehran to retaliate against U.S. bases in the region if attacked.<\/p>\n “That could really affect oil markets and currency markets if things go bad there. It’ll be a test also about whether or not the U.S. dollar is still a safe haven,” said Capurso.<\/p>\n “A major attack would call that into question.”<\/p>\n Rates, rates, rates<\/p>\n The focus for markets now turns to the release of the U.S. core PCE price index and advance fourth quarter GDP figures later in the day, which could drive the next move in currencies.<\/p>\n Investors continue to price in roughly two Fed rate cuts this year, though expectations for such a move in June have dipped to a roughly 58% chance from 62% a week ago, according to the CME FedWatch tool.<\/p>\n “The big argument within the Fed is whether or not to proactively lower rates to support the job market, or to keep rates higher for longer in order to fight inflation,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management, adding that Friday’s PCE report will “add to the debate”.<\/p>\n Elsewhere, the Australian dollar<\/a>\u00a0was down 0.08% at $0.7055 but set to lose just 0.2% for the week, as it continues to be buoyed by\u00a0hawkish\u00a0rate expectations at home.<\/p>\n