Dollar Set for Biggest H1 Drop Since 1970s

The US dollar hovered near a 3.5-year low on Friday and is on track for its largest first-half decline since the 1970s, driven by expectations of rate cuts and uncertainty over Jerome Powell’s future as Fed chair. Wall Street rose on Thursday, with the Dow, S&P 500 and Nasdaq each gaining just under 1%, as traders responded to easing tensions in the Middle East and signs of a US-China trade breakthrough on rare earths. Treasury Secretary Scott Bessent urged removal of a proposed foreign investor tax, while investors await Friday’s US PCE inflation reading for further clues on Fed policy.

Equities

The FTSE 100 rose 0.2% on Thursday, supported by corporate updates and rate cut expectations, though a stronger pound weighed on companies with large US dollar revenues such as Unilever and HSBC.

Unilever shares dipped as the pound climbed to its highest level since 2021. HSBC also slipped slightly under pressure from the currency move. Shell shares edged higher after the company denied reports it was in talks to acquire BP. BP shares also ended the session marginally up following the denial.

In the FTSE 250, Inchcape rose 5.9% after confirming it would maintain its full-year outlook, citing cost savings that helped offset pressure from US tariffs and rising competition. Moonpig dropped 9.2% to a two-month low after warning of slower earnings growth and announcing its CEO will step down. Next 15 Group fell sharply, down 28%, after it said its 2026 profit would be significantly below expectations.

In the US, all three major indices gained ground. The Dow Jones Industrial Average rose 0.94% to close at 43,386.84. The S&P 500 added 0.8% to finish at 6,141.02, while the Nasdaq climbed 0.97% to 20,167.91. Both the S&P 500 and Nasdaq came within close reach of their all-time closing highs.

Freeport-McMoRan led gains among US companies, jumping 6.8% as copper prices hit a three-month high. Southern Copper rose 7.8% for the same reason. Bank stocks were strong across the board, with the S&P 500 banks index up 1.6% after the Federal Reserve proposed easing leverage rules for large institutions.

Micron forecast stronger-than-expected fourth-quarter revenue late on Wednesday but saw its share price fall 1%, likely due to profit-taking or broader caution around tech valuations.

Forex & Commodities

The US dollar hovered near its lowest level since early 2022 on Friday, with traders pricing in 64 basis points of Federal Reserve rate cuts this year. The dollar index stood at 97.398, down more than 10% year-to-date and heading for a sixth straight monthly loss. Sterling was steady at $1.3725, close to its highest level since October 2021, while the euro eased slightly to $1.1689 after touching $1.1745, its strongest since September 2021. The Taiwanese dollar rose to its highest level since April 2022 as exporters continued to sell dollars, with sentiment buoyed by expectations of Fed easing.

The Japanese yen slipped marginally to 144.56 per dollar, while the Swiss franc remained firm at 0.8013, near a 10-year high. The Australian dollar traded at $0.6544 after reaching a seven-month high on Thursday, on track for its best weekly performance since early April.

Gold fell 0.9% to $3,296.79 per ounce on Friday and is set for a weekly decline of over 2%, as easing geopolitical concerns and progress in US-China trade talks reduced safe-haven demand. US gold futures dropped 1.2% to $3,309.30. Platinum lost 2.1% to $1,388.04 after hitting an 11-year high earlier in the week, while palladium rose 1% to $1,142.81. Spot silver edged down to $36.54.

Brent crude rose 0.5% to $68.09 a barrel, and WTI crude gained 0.5% to $65.57. Both benchmarks are still set for a weekly loss of around 12%, their largest since March 2023. Earlier gains following the US strike on Iranian targets were reversed after a ceasefire was announced.