The US dollar (USD) weakened on Friday (July 18th), retreating from a three-week high as momentum waned. However, the greenback remained supported by strong US economic data released this week, which has reduced the likelihood of an immediate interest rate cut by the Federal Reserve (Fed).

The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, fell about 0.36%, approaching 98.30 in the European session on Friday. This decline came after the index hit a three-week high on Thursday, briefly approaching 99.00.

This week's US data has reinforced the narrative of a resilient economy and stable inflation, supporting the US dollar. Retail Sales and Initial Jobless Claims pointed to strong consumer demand and continued labor market strength.

Meanwhile, the Philadelphia Fed Manufacturing Index surprisingly improved, jumping to 15.9 in July from -4.0 in June, defying the consensus forecast for a negative reading. On the inflation front, both the Consumer Price Index (CPI) and the Producer Price Index (PPI) indicated persistent price pressures, reminding the market that inflation is not yet fully under control.

These figures come amid ongoing trade tensions stemming from US President Trump's trade policies, which increase the likelihood that the Fed will hold interest rates for longer.

Market focus shifts to the University of Michigan Consumer Sentiment data, scheduled for release at 14:00 GMT. This report will provide fresh insights into household confidence and inflation expectations. A strong reading could revive US dollar buying and push the DXY back to recent highs, while a weak reading could accelerate Friday's decline. (alg)

Source: FXstreet