U.S. Dollar Poised for Best Weekly Gain in Nearly a Month; Euro and Sterling Also Strengthen
By Anuron Mitra, Investing.com — June 2, 2026
The U.S. dollar edged lower on Friday, though the decline was minimal as the currency continued to be set for its strongest weekly advance since early May. The greenback has benefitted from a series of market developments, including the nomination of former Federal Reserve Governor Kevin Warsh as the next Chair of the Federal Reserve, which fueled expectations of a hawkish monetary stance ahead.
Dollar Index Nears 97.60 as Weekly Gains Approach 0.6%
At 13:51 ET on Friday, the Dollar Index, which measures the greenback’s strength against a basket of six major currencies, traded 0.2% lower at 97.60. Despite the slight dip, the index is on track to log approximately a 0.6% increase for the week, marking its best weekly performance since January.
The rigorous advance followed Warsh’s nomination last week, viewed by investors as signaling a possible tightening of the Fed’s balance sheet and continued restraint on monetary policy—both typically supportive to the dollar.
Safe-Haven Demand Rises Amid Tech Sector Selloff
Contributing to the dollar’s appeal, global equity markets experienced their largest weekly selloff since November. The downturn was largely driven by investor concerns about significant corporate spending on artificial intelligence technologies, and the uncertain ramifications that widespread AI adoption could have across various industries.
“The market is facing pressure from cyclical valuation concerns, as S&P 500 price-to-earnings ratios remain near multi-decade highs,” noted analysts from ING. “Moreover, the equity market appears fully invested, limiting upside potential and propelling safe-haven demand, which supports the dollar.”
The dollar’s boost from safe-haven flows helped the Dollar Index climb to levels not seen since the third week of January.
U.S. Labor Market Data Delay and Implications
Initially, traders eyed the monthly U.S. jobs report, scheduled for release on Friday, as a possible catalyst for currency market movement. However, the report’s postponement until next week shifted focus to other, softer labor market data released earlier in the week. These indicators suggested tentative recovery attempts following a notable dip in April, eliciting cautious interpretations regarding consumer spending resilience and economic momentum.
“Any unexpected weakness in labor data could weigh modestly on the dollar, reminding markets of the economy’s dependency on stock market vitality,” ING added.
Euro and British Pound Rebound on Central Bank Developments
Meanwhile, the euro and sterling both regained ground following central bank policy announcements. The EUR/USD pair rose 0.4% to 1.1820 after the European Central Bank kept interest rates steady on Thursday, with ECB President Christine Lagarde signaling no imminent rate cuts despite the recent appreciation of the euro.
The GBP/USD climbed 0.6% to 1.3618, recovering from a near 1% drop the previous day. The Bank of England’s Monetary Policy Committee surprised markets with an unexpectedly close vote to keep rates on hold. Macquarie strategist Thierry Wizman explained that the BOE’s ‘dovish’ tone and internal divisions hint at a possible rate cut in March, which has put some pressure on the pound.
Additionally, political tensions within the UK, particularly speculation of a Labour Party leadership challenge to Prime Minister Keir Starmer, have darkened the pound’s outlook. “The risk of a far-left Labour leader replacing Starmer is weighing on GBP sentiment,” Wizman noted, adding that “the euro now appears relatively more attractive despite a yield disadvantage.”
Asia Markets: Japanese Election and Chinese Yuan Movements
In Asia, the USD/JPY pair remained mostly unchanged at 157.06 on Friday, though it had surged around 1.5% during the week. Market attention is focused on Japan’s upcoming general election for the lower house on Sunday, with polls indicating a strong showing for Prime Minister Sanae Takaichi’s conservative party. A bigger majority would empower the government to advance its plans for fiscal stimulus, including tax cuts and increased spending, potentially impacting the yen.
The Chinese yuan edged slightly higher to 6.9388 against the dollar, approaching its longest consecutive weekly gain in almost 13 years. The yuan’s strength was supported by strong midpoint fixes from the People’s Bank of China. Despite a minor 0.2% weekly decline against the dollar, the yuan remains on track for its 11th straight week of gains.
Australian Dollar Climbs on Hawkish RBA Comments
The Australian dollar surged 1.3% to 0.7019 following hawkish remarks from Reserve Bank of Australia Governor Michele Bullock. The RBA had raised interest rates by 25 basis points and revised its economic growth and inflation outlooks upward, fueling bets on further tightening measures.
Summary
The U.S. dollar is closing the week poised for its best advance in nearly a month, buoyed by hawkish expectations surrounding Federal Reserve chairmanship and fears stemming from a renewed technology sector selloff. Concurrently, the euro and sterling have gained modestly following central bank decisions and political developments, while Asian currencies and markets prepare for potentially significant election outcomes and economic policy announcements.
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