The US Dollar (USD) has paused its recent rally, trading marginally lower against major peers during the European session on Friday, as global risk aversion intensifies amid a sharp selloff in technology stocks and shifting central bank expectations [1][2][3][5]. The Dollar Index (DXY) is quoted near 101.30–101.50, having retreated from a more than one-year high of 101.80 posted on Wednesday [2][3][5]. The cautious market mood is underscored by heavy losses in Asian equities, with South Korea's KOSPI down about 8% and Japan's Nikkei 225 falling 4.5% on the day, while Nasdaq Futures are down over 1% [3].
Currency pairs reflect this risk-off sentiment and central bank repricing. GBP/USD is holding just above 1.3200, maintaining a positive bias for a second day but lacking bullish conviction due to ongoing UK political uncertainty and a bearish technical setup. The pair recently broke below 1.3300, a key trigger for bears, and the Relative Strength Index (RSI) at 47 suggests consolidation rather than trend strength. Resistance is seen at the 200-period SMA at 1.3384, while the mid-1.3100s serve as near-term support [1]. The British Pound's rally has faded after an initial positive reaction to Prime Minister Keir Starmer’s resignation, with markets awaiting clarity on Andrew Burnham’s policies as the likely successor [4].
The Australian Dollar (AUD) is the weakest among majors, trading 0.25% lower near 0.6890 against the USD, pressured by expectations of dovish Reserve Bank of Australia (RBA) policy as headline inflation cooled to 4% YoY in May from 4.2% in April [2]. The AUD/USD pair remains below its 20-period EMA at 0.7015, with an RSI of 27.96 indicating oversold conditions [2]. The US Dollar has been strongest against the AUD this week, up 1.67% [3].
EUR/GBP is trading flat around 0.8615, showing signs of bottoming after bouncing from 0.8600. The Euro is supported by lower oil prices, which have returned to pre-war levels due to increased traffic through the Strait of Hormuz, providing relief to the Eurozone economy. However, weak German consumer and business data have limited the Euro's recovery. Technicals show a reverse Head & Shoulders pattern in progress, with resistance at 0.8635 [4].
USD/JPY is struggling to extend gains above 162.00, trading slightly lower at 161.55. The pair is supported by a bullish near-term bias above the 20-period EMA at 160.73, but faces resistance at 162.00. The Japanese Yen is strengthening on expectations of further Bank of Japan (BoJ) rate hikes, with the BoJ's June meeting summary noting a desire to bring rates closer to the estimated neutral rate of 2% as soon as possible. Meanwhile, the odds of the Fed delivering at least two rate hikes this year have dropped to 41.7% from 50.2% a week ago, as oil prices fall and inflation expectations moderate [2][5].
US economic data released this week include a 4.1% YoY rise in the PCE Price Index for May, in line with expectations, a 4.5% monthly decline in Durable Goods Orders, and 215,000 Initial Jobless Claims [3]. Fed officials, including New York Fed President John Williams, maintain that inflation will remain elevated for longer, with Williams stating that policy is 'well-positioned' and pushing back expectations for a return to the 2% inflation target before 2028 [5].
CONCLUSION
The US Dollar's rally has stalled amid global risk aversion, softer US data, and shifting central bank expectations. While the Greenback remains resilient, especially against the Australian Dollar, technical and fundamental signals suggest consolidation as markets await further clarity from central banks and political developments. Currency volatility is likely to persist as traders respond to evolving inflation and policy outlooks.