FX.co ★ Dollar Set for Strong Weekly Advance

The dollar index rose to around 99 on Friday and was set to log a weekly gain of more than 1%, buoyed by mounting inflationary pressures that reinforced expectations of a Federal Reserve rate hike later this year. Earlier in the week, data showed that US wholesale inflation in April accelerated at its fastest pace since 2022, while consumer prices registered their largest increase since 2023, amid renewed price pressures tied to the energy shock linked to the Iran conflict. Although retail sales growth slowed in line with forecasts, it still signaled resilient consumer demand. Markets have now completely priced out the prospect of a Fed rate cut this year, and some traders are increasingly factoring in the possibility of a rate hike by December. At the same time, investors remained focused on the second day of high-level talks between President Donald Trump and Chinese President Xi Jinping, after Xi warned that Taiwan could become a source of potential “clashes” between the world’s two largest economies.