Dollar Ends Week Down as Inflation Data Eases Fed Hike Expectations

The dollar remained steady on July 17, 2026, but ended the week down by 0.2%, as tame U.S. inflation data reduced expectations of imminent rate hikes from the Federal Reserve. Escalating tensions between Iran and the U.S. provided safe-haven demand for the dollar, pushing oil prices to near one-month highs. "The tech-led global equity market plunge and disruption to Strait of Hormuz traffic triggered a flight to safety," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman. The dollar index (USD) stood at 100.76, marking a weekly decline of 0.2%. The euro held steady at $1.1436, reflecting a 0.2% weekly gain. Sterling fell 0.2% to $1.3455 but posted its third consecutive week of gains, driven by UK economic growth data and expectations of a centrist finance minister under new Prime Minister Andy Burnham. The Australian dollar declined 0.23% to $0.6980, though risk-off sentiment persisted amid global stock declines. U.S. consumer sentiment reached a five-month high in July, though traders noted the relief may be temporary due to rising gasoline prices from renewed Middle East conflict. The Japanese yen traded at 162.44 per U.S. dollar, remaining near its 40-year low, with traders wary of potential intervention from Tokyo. U.S. retail sales showed slight growth in June, with lower gasoline prices offsetting service station receipts, but online spending surged, prompting economists to raise second-quarter growth estimates.

Markets are reacting to Iran's renewed attacks on the U.S. by providing safe-haven demand for the dollar, while easing inflation data has reduced expectations of Fed rate hikes. This has triggered global equity market declines and higher oil prices. However, if U.S. economic data continues to improve and the Middle East conflict remains temporary, the dollar may find short-term support.