The dollar rose for the fifth straight day, hitting its highest level since June 23

The dollar pushed higher for the fifth straight day on Wednesday, building its longest run of daily gains since February, as new economic data pointed to stronger-than-expected U.S. growth and inflation.

According to Bloomberg, the Dollar Spot Index climbed 0.3%, hitting its highest level since June 23, backed by reports showing that both consumer activity and labor conditions remained solid in the second quarter.

The second-quarter rebound was largely fueled by a modest rise in household spending, while the core PCE, the inflation gauge preferred by the Federal Reserve, rose 2.5% compared to Q2 of 2024.

On the employment side, data from ADP Research showed private-sector payrolls remained robust, adding to the broader view that the U.S. economy still has plenty of steam. All of this has helped keep the dollar on firm ground, even as global currency markets turned volatile.

Fed’s pause keeps traders watching September

Investors are now locked in on the Fed’s next steps, with the central bank widely expected to hold rates steady in its latest policy meeting. Attention has since turned to September, where the probability of a rate cut sits at 60%. Still, the resilience of recent data is forcing traders to reassess.

Valentin Marinov, who heads Group-of-10 FX strategy at Credit Agricole, said the numbers may push the Fed into a slower path on easing. “Markets may see the data as arguing for less aggressive and more back-loaded Fed easing,” Marinov said. “The USD rate appeal could grow especially if Fed Chair Powell stays true to his still rather neutral outlook on policy.”

But President Donald Trump has been raising the pressure. Since returning to the White House, Trump has repeatedly called for lower interest rates. However, the data is complicating that narrative. “If the US data continues to signal resilience, President Trump may have to recognize that and even tone down his attacks on the Fed,” Marinov added.

The positive tone for the dollar wasn’t matched on the other side of the Atlantic. The euro tumbled 0.65% to $1.1471, slipping to its lowest level since June 23 and heading for its fifth straight session of losses. This also puts the euro on track for its first monthly decline in 2025, following earlier market reaction to a trade deal between the U.S. and European Union.

Steve Englander, who leads global G10 FX Research at Standard Chartered in New York, said traders may be overreacting to the GDP release. “I think people are reading too much into the GDP numbers; nobody in markets should think GDP was that weak in Q1 and that strong in Q2 even though the big drivers were inventories and net exports,” Englander said.

Trade talks change from Europe to Asia

Fresh trade agreements with Japan last week and the EU over the weekend added to the view that the U.S. is still willing to engage globally, something that briefly helped calm investor concerns earlier this month. But things are now changing again.

Officials from the U.S. and China are discussing whether to extend their 90-day tariff truce, while Trump has opened a new front by announcing a 25% tariff on Indian imports starting August 1.

Englander commented on that decision as well, saying, “Trump can afford to be harsh on India because he’s gotten a bunch of deals already and he’s trying to pressure them to be more forthcoming. I don’t think the tariffs will end as harshly as he hinted, but he does want to negotiate with India on terms favorable to the US.”

In Europe, fresh economic figures brought more divergence. Germany’s economy contracted in the second quarter, while France managed to beat expectations. That imbalance contributed to the euro’s ongoing weakness.

Meanwhile, attention is turning to Japan, where markets await comments from BoJ Governor Kazuo Ueda on Thursday. Many are hoping that the recent U.S.-Japan trade agreement will give the Bank of Japan enough room to hike rates.

The dollar also gained against other major currencies. It climbed 0.28% to 148.88 yen, reaching a two-week high. It also strengthened 0.65% to 0.811 francs against the Swiss franc, the highest since June 24.

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